First Time Homebuyer Credit
On July 30, 2008 President Bush signed into law the Housing and Economic Recovery Act of 2008 with several significant changes. One of these changes was the First Time Homebuyer Credit.
This credit, as it is called, is actually an interest free loan from the Federal Government. A first time homebuyer if married filing jointly can get a credit equal to the lesser of $7,500 or 10% of the purchase price of a principal resident. The credit must be paid back over a 15 year period, beginning two years after the credit was taken. The repayment is preformed through your tax return and not a direct payment. The credit phases out with married filing joint returns with modified adjusted gross income between $150,000 and $170,000 for the year of purchase.
Who qualifies as a First Time Homebuyer
A taxpayer is considered a first time homebuyer if the taxpayer had no ownership interest in a principal residence in the United States during the 3 year period prior to the purchase of the new home
Who is disqualified as a First Time Homebuyer
There are several cases in which someone may be disqualified as a first time homebuyer.
- Home financing is from tax-exempt mortgage revenue bonds.
- Homebuyer is a nonresident alien.
- Homebuyer disposes of the residence
- The residence stops being the principal residence before the end of the tax year for which the credit would apply
- Others items of disqualification apply to Washington DC
There are exceptions to repayment of the credit and who must repay the credit upon separation or divorce. Please contact your tax professional regarding additional information for First Time Homebuyer Credit.
Information has been extracted from Tax Tips received from Western CPE and submitted by Myron Trafelet CPA of Trafelet Accounting PLLC 19756 N John Wayne Parkway, Suite 109, Maricopa, AZ 85239. myron@trafeletaccounting.com