What is this home buyer tax credit I keep hearing about and is there a chance it may pertain to me?

Who does it apply to?  The tax credit is for first time home buyers in addition to someone who has not owned a principal residence during the three year period prior to the purchase.

How much is the credit for?  The maximum amount is $ 8000, as long as the home price equals $80,000 or more (pretty easy!) If less than $ 80,000, the credit is 10% of the purchase price.

What time period does it apply for?  The credit is available for all principal residences bought between 4/9/08 and 11/30/09.

What’s this I hear about getting the money now?  Yes, it’s true! We would be glad to amend your 2008 tax return right now if it applies. Even though the house may have been bought after 1/1/09, we can still show it on the 08 return and get the refund back now! You also can wait and place it on your 2009 return.

What if I didn’t pay any taxes in 08?  Not a problem! It’s a refundable credit, meaning you get it no matter what, even if you paid zero taxes!

Is this for principal residences only?  Yes, indeed. Second homes or rentals do not apply.

Are there any income limits where they don’t allow me the credit?  Yes, if you’re single and your income is over $ 75,000, or if you are married and your income is over $ 150,000. In either case, the credit would not apply.

What’s this I hear about getting the credit against the new loan?  It’s absolutely true! The FHA announced two weeks ago that thousands of homebuyers will be able to get short-term loans so they can quickly make use of the credit. If it’s used as part of the downpayment, naturally the tax return would not reflect the credit since the taxpayer would have already received it!

Do I need to pay the credit back?  The obligation to repay the credit arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received would become due on the return of the year when the home ceased being your principal residence.

How come you guys know so much?  Because we read a lot! And we’re naturally smart! Did I actually say that?

Please give us a call and ask for Frank or Paul at (703) 818-8056 if you have any additional questions about this program that we did not discuss here.

Thanks much!

Paul Karstetter, CPA, CTP, PFS