Do You Qualify For The $8,000 Homebuyer Stimulus Package?

It’s been all over the news…First time homebuyers rejoice….you might be eligible for a whopping $8,000 tax credit. So..what is the hook? Let’s take a look at some of the fine print.

1. First time homebuyers are eligible. For purposes of the $8,000 tax credit, a “first-time homebuyer” is defined as any individual ( or spouse) with no present ownership interest in a principal residence during the past 3 years. Even if a taxpayer owned another principal residence in the past, he or she can still qualify as a “first-time homebuyer” as long as the taxpayer transferred title to previous residence over three years ago.

2. What constitutes a “principal” residence under the $8,000 tax credit? A principal residence is generally the home the taxpayer lives in the majority of the time. It must be located in the United States. To qualify for the tax credit, the property can be new construction or a resale. It cannot, however, be a vacation home or rental property.

3. Do you have to purchase a home within a certain time-frame? Yes. A “purchase” for purposes of this tax credit is defined as an acquisition. An “acquisition” generally occurs when the property closes and title to the property transfers to the Buyer, and not when the purchase contract is signed. In order to be eligible for the $8,000 tax refundable tax credit, you must purchase AND close on your primary residence between January 1, 2009 and November 30, 2009. For example, if you enter into a contract to buy a property on October 25, 2009 but do not close on the property until December 5, 2009, you will not qualify for the tax credit, because, based on the law, acquisition did not occur before November 30, 2009.

4. Do all “first-time homebuyers” get the maximum $8,000 tax credit? No, the amount is based on several things: purchase price and income. The maximum tax credit for an individual first time buyer is 10% of the purchase price, not to exceed $8,000. For instance, if you purchased a home for $50,000, the maximum amount you would be eligible for would be $5,000; however, if you purchased a home for $80,000 or more, the maximum amount you would be eligible for would be $8,000. The “first-time homebuyer” tax credit is subject to certain income restrictions. The tax credit starts to phase away for an individual with a modified adjusted gross income from $75,001 to $95,000 ( $150,001 to $170,000 for joint filers). The tax credit is eliminated completely if an individual’s modified adjusted gross income is over $95,000 ( $170,000 for joint filers).

5. Do you have to repay the $8,000? No, the tax credit does not need to be repaid if the buyer owns and resides in the property for at least 36 months. If the Buyer disposes of the property or ceases to be primary residence within 36 months of purchase, the buyer will be required to repay the tax credit.

6. How does a first-time homebuyer apply for the tax credit? A first time buyer may claim the tax credit on their federal tax returns using IRS Form 5405, which is available at http://www.irs.gov/pub/irs-pdf/f5404.pdf. If you have already filed your 2008 taxes, you can file a amended return and include the above form.

What a great time to buy!…Historically low interest rates, affordable housing prices, loads of inventory to choose from…PLUS up to $8,000 tax credit. Take advantage of this stimulus package…and enjoy the benefits of homeownership.

Until next time….

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