1st Time Home Buyers

$8000 federal tax credit!!!

About the 1st time home buyer tax credit- Home Buyers may qualify to receive tax refund

By Elizabeth Weintraub

The $8000home buyer tax credit--signed into law by President Obama on Feb. 17, 2009, as part of the American Recovery and Reinvestment Act of 2009--

The difference between a tax credit and a tax deduction  A tax credit is applied directly to taxes owed.  If you owe $8,500 in taxes and apply the $8,000 tax credit, your tax bill is reduced to $500.  If you have already paid $9,000 through payroll deductions or estimated tax payments, you will get a refund of $8,500.   A tax deduction is a reduction against earned income. If you made $100,000, an $8,000 tax deduction would simply reduce that income for tax purposes to $92,000, and you would pay taxes on that lower income.

How does the $8,000 Home Buyer Tax Credit Work?

Qualified home buyers can receive a true tax credit of 10% of the purchase price, with a maximum credit amount of $8,000.  This means if you buy a home for $80,000 or more, you can deduct the full $8,000 tax credit from the amount owed to the I.R.S.  If you usually get a refund on your taxes--and you qualify for the maximum tax credit--you can add another $8,000 to that refund for 2009.  You can also amend your 2008 return and take a deduction in 2008, if you so desire.

Qualifications for the $8,000 Home Buyer Tax Credit

Only first time home buyers are eligible.  This is defined as not owning a home over the past 3years.  Here are the other qualifications: The home must be your principal residence.  Only homes purchased on or after January 1, 2009 and before December 1, 2009 qualify for the tax credit.  Limited to individuals with adjusted gross income of $75,000 as a single person or $150,00 filling jointly.There is a phase out for single incomes between $75,000 and $95,000, and for couples filing jointly with incomes between $150,000 and $175,000.

More about the $8,000 Home Buyer Tax Credit 

Unlike the 2008 $7,500 home buyer tax credit, the $8,000 tax credit is not a loan and does not need to be repaid.  It's like free money for buying a house during the specified time period and meeting certain requirements.  Also, unlike the 2008 $7,500 home buyers tax credit, you can use the credit if you financed your home purchase with state or local bond funding.  However, if you sell that home within the first 3 years of ownership, the entire amount of the tax credit is recaptured.  This means you will be required to give that money back to the I.R.S.  So, if you take advantage of the tax credit, plan to stay put for 3 years