In 2008 the sum was up to $7,500 and the credit was to be paid back over 15 years. From January to November of 2009, the sum was up to $8,000 with no obligation to pay the money back.
From December 2009 to April 2010 the lot was up to $8,000 for first-time buyers and the amount did not need to be paid back. For Nov 7, 2009 through April 2010 the sum dropped down to $6,500 for “long-term residents” buying a new house.
If a residential property was purchase in that time period, the amount did not need to be paid back. From May 2010 until April of 2011 the capital is only available to qualified members of the U.S. uniformed services.
The dollar amounts listed above are the maximum lots claimable, but the actual amount credited is worth 10% of the purchase price of the house. No tax credit is allowed if the purchase price of the house exceeds $800,000.
For the purpose of this tax credit, a first-time homebuyer is defined as someone who has not owned a primary residence in the three-year period ending on the date of purchasing the home. Married couples are considered first-time buyers if neither spouse has owned a residence in the previous three years.
To qualify as a long-term resident homebuyer, you must be a person who already owns a house but are buying another house. To qualify, individuals need to have owned and lived in their residence for at least five consecutive years in the eight-year period that ends on the purchase date of the new property.
The capital has a very limited life-span. Individuals will need to purchase a residence after April 9, 2008, and before May 1, 2010 and qualified service members must purchase a residence before May 1, 2011.
A primary residence is a residence in which an individual lives most of the time. A primary residence can be a house, condominium, co-operative apartment, houseboat, or mobile home.
To determine if the capital is reduced or eliminated by the income phase-out range, individuals will need to determine their modified adjusted gross income. For the purposes of determining income eligibility for this capital, adjusted gross income is modified by adding back certain excluded income.
Taxpayers will be able to claim the capital on their 2008 return for homes purchased in 2008. For homes purchased in 2009, the IRS will allow the purchasers to file an amended 2008 return to claim the lot.
For the 2009 tax credit to show up on the 2008 return, taxpayers will need to elect to treat the 2009 home purchase as if it were made on December 31, 2008. Guidance released by the IRS provides that taxpayers making this election are eligible for the higher $8,000 credit amount and do not need to repay the capital if they take their 2009 credit on their 2008 return.
Similarly, for houses purchased in 2010, the capital can be taken either on a 2009 return or on the 2010 return. The 2008 credit needs to be repaid in equal installments over 15 years.
Unlike any other tax credit, the first-time homebuyer capital must be repaid over 15 years. This pay-back feature applies only to homes purchased in 2008.
You will get your refund when you file the tax return. Then the money will be repaid as an additional tax on your return for the next fifteen years, starting with the 2010 tax return.
For the maximum $7,500 capital, this works out to annual repayments of $500 per year. This tax credit amounts to an interest-free 15-year loan for first-time homebuyers.
The money will also need to be repaid in full if the taxpayer sells the house within the fifteen-year repayment period, or if the property is no longer the taxpayer’s primary residence. The capital will be disallowed if a taxpayer sells the house before the end of the same year in which the house was purchased.
Jack R. Landry has worked since 1988 as a tax attorney. He has written hundreds of articles about taxes and recommends (http://www.TaxCrisisInstitute.com) for tax relief.
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