First time home buyers account for close to 40% of the entire market. Considering that purchasing a home is one of the biggest financial and lifestyle decisions in one’s lifetime, it is important to be aware of existing home buying assistance programs and how to take advantage of them. Here are the highlights of the First Time Home Buyer Tax Credit Program:
All U.S. citizens who file taxes and who are first time home buyers, defined as buyers who have not owned a home during the past three years, are eligible for the $7,500 tax credit. First time buyers who are using a state or local housing agency tax exempt bond mortgage to finance the property or who are non-resident aliens are not eligible.
All homes, whether single family, townhomes or condominiums, qualify as long as the home is used as a primary residence and the buyer has not owned a home in the previous three years.
Buyers who file as single or head-of-household taxpayers are eligible for the full $7,500 credit if their AGI (adjusted gross income) is less than $75,000. Married couples filling jointly have an income limit of $150,000. A partial first time home buyer tax credit is available for single or head-of-household taxpayers who earn between $75,000-$95,000 and for married couples filing jointly who earn between $150,000-$170,000.
To qualify for the $7,500 tax credit, first time home buyers must close on the sale of their home between April 9, 2008 and July 1, 2009.
The tax credit is refundable. If a buyer pays less than $7,500 in federal income taxes, then the government will write a refund check for the difference. If the purchase of the home takes place in 2008, the tax credit applies to 2008 tax returns; if the purchase takes place in 2009, the buyer has the option of applying the credit towards 2008 or 2009 tax returns. The tax credit is an interest free loan to be paid back over 15 years. The minimum repayment amount must be 15 equal annual installments.