Basic Information About the Homebuyer’s Tax Credit

With difficulties in the economy emerging every new day, people are having to look for a variety of ways to save what little money they are earning. It seems that everyone is having to cut back in one way or another just to make it through everyday life. Spending money seems to be out of the question. But where does that leave first time homebuyers who are seeking to invest in a principal property to start their lives in? What are they supposed to do in this tight money situation? Well, all they need to do is fill out a tax credit form… 

            Many readers may be aware of the tax credit established for home buyers in 2008, but the government has decided to give out a modified version for the 2009 tax year. In 2008, all the money that a home buyer received was required to eventually be paid back. The 2009 first time home buyers tax credit is no longer a loan, but rather a true credit of up to $8000 that a first time home buyer can receive based on the value of his house. This is a dollar for dollar reduction of an individual’s overall taxes that can significantly impact the results of their tax returns. 

            Of course, there are some stipulations that need to be abided by for a person to qualify for the stimulus plan tax credit. The credit only goes to a first time principal home buyer, with “first time” meaning that the individual has not owned a home in three years prior to the new purchase and “principal” meaning that the purchased home is the individual’s primary residence. When it comes to married couples, both of the individuals need to be categorized as first time home buyers to receive the tax credit. Individuals buying a house together though can use the status of whatever individual may qualify.

             Income is also a determining factor for recipients of the stimulus plan tax credit. An individual filing for the credit must make less than $75,000 and married applicants must make less than $150,000 combined a year. Those individuals who make above these levels in modified adjusted gross income could qualify for part of the stimulus tax credit with their levels of credit decreasing proportionally to the amount of money that their income exceeds. No individual can apply if he or she makes more than $20,000 above the capping amount.

             In spite of the complications of who qualifies, the process of filing for the potential $8000 tax credit is relatively simple. A home buyer needs to fill out an IRS Form 5405 and then claim the amount from the form on the 1040 form they normally fill out. The rest is a matter of income and time. Perspective applicants should note that they have to reside in their new home for three years after they receive the credit or they will be required to pay it back. Most people don’t purchase a home with the thought of moving out that quickly, but it is something to be aware of. Overall, the 2009 first time home buyers tax credit is a great solution for victims of this falling economy, and it may be one of the first steps toward recovery.