Aren’t you glad you continued reading. Of course not everyone will be eligibe for the tax credit. There is criteria that you must meet in order to be eligible for the tax credit.
• The deduction is worth 10% of a home’s value up to $8,000, which means all homes worth more than $80,000 could qualify for the maximum amount.
• There is an income limit to qualify. A married couples’ modified adjusted gross income (MAGI) should be under $150,000 and single filers’ should be less than $75,000.
• Partial tax credits may be available for married couples with MAGI incomes over $150,000 but under $170,000, and single with incomes over $75,000 but under $95,000.
• If a married couple files separately, they can both claim 5 percent of the home purchase ($4,000 each for a home over $80,000) on their tax returns.
• It’s a tax credit, not a deduction. That means the entire amount goes back to the *first-time homebuyer unlike deductions, such as mortgage interest, that are subtracted from gross income before tax is calculated. If qualified for $8,000, the buyer gets $8,000, even if they would not owe that much in taxes otherwise.
• The tax credit applies to homes purchased from Jan. 1, 2009, through Nov. 30, 2009.
• The tax credit does not have to be paid back, providing the home buyer keeps the property for at least 36 months and resides in the home. Home must be your principal residence for at least 36 months.
• To qualify as a first-time home buyer, the purchaser cannot have owned a home within the previous three-year period. However, ownership of a vacation home or rental home does not disqualify the buyer.
• If purchasing a new home, the effective date to receive the credit is the first day the homeowner actually lives in the house. If construction began in 2008, that buyer could still qualify. And if construction begins in 2009 but the owner does not take possession until 2010, the buyer would not qualify.
• The tax credit can be claimed on 2008 income tax forms even though the purchase took place in 2009.
• The tax credit is not a down payment, but it could be used toward a down payment if first-time home buyers plan ahead. U.S. taxpayers have money withheld from every paycheck for income taxes. If they owe more tax than the amount deducted, they pay the IRS; if they owe less, they get a tax refund.
By anticipating at least an $8,000 refund in early 2010 when they file 2009 taxes, buyers could cut down on their tax withholding this year and save the money toward a downpayment. There is one caveat, however: Should they not buy a home in the qualifying period, they would still owe the IRS the money, and reducing their withholding amount could result in a high bill at tax time.
To help home buyers understand the ways they can file to receive the homebuyer credit, the IRS has release additional information. Click here for IRS information.