Uncle Sam’s $8,000 For First Time Home Buyers
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The government is hoping if you don’t now own a home that you’ll make the logical choice and buy one this year. If you do, there’s an $8,000 credit from Uncle Sam available to help you out.
Last year the government announced that if you were a first time buyer and bought a home that you could get a $7,500 tax credit. However, this was one of those deals with more fine print than a credit card offer.
Under the 2008 program you got a credit equal to 10 percent of the purchase price of a prime residence up to $7,500 — but you had to pay it back either from profits when you sold or repaid at the rate of $500 a year beginning in 2010. In effect, it was an interest-free loan. Good, but not good enough to attract much interest from first-time buyers.
Now we have the 2009 version of the program. The dollar amount has been upped to a maximum tax credit of $8,000 and qualified borrowers do not have to repay the money.
In other words, an outright gift. Real money from Uncle Sam.
Let’s look at some specifics:
___ You have to buy a prime residence, not an investment property or second home. The property can be a single-family home, condo, townhouse or co-op.
___ Your credit is equal 10 percent of the purchase price of the property up to $8,000. The credit is used to reduce your federal tax bill. If the credit is bigger than the federal taxes you owe, you get a check from Uncle Sam for the difference.
___ Not everyone can play. The credit phases out above $75,000 for singles (and is gone at $95,000) and $150,000 for married buyers (and is gone at $170,000).
___ Generally, you’re a “first-time buyer” if you did not hold title to a principal residence for three years prior to buying in 2009.
___ You can buy using funds from a state-run first-time buyer program, money which is typically available with little down and at low rates. Buyers who used state funds were banned under the 2008 program. Be sure to ask brokers and lenders about these programs.
___ You have to own the property for at least three years. If you sell before three years the entire credit can be recaptured; that is, you have to pay it back. There are exceptions according to the IRS:
* If you sell the home to someone who is not related to you, the repayment in the year of sale is limited to the amount of gain on the sale. (See item 8 under Who Cannot Claim the Credit for the definition of a related person.) When figuring the gain, reduce the adjusted basis of the home by the amount of the credit.
* If the home is destroyed, condemned, or disposed of under threat of condemnation, and you acquire a new main home within 2 years of the event, you do not have to repay the credit.
* If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit.
* If you die, repayment of the credit is not required. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the credit.
___ To claim your credit you have to file IRS Form 5405.
___ You have to buy after January 1st 2009 and before December 1, 2009. Caution: IRS Form 5405 says the date you acquired the home “is the date you purchased it (or the date you first occupied it if you constructed your main home).” Do they mean the day the sale agreement was signed and accepted, the date of settlement, the day you moved in or the date that the transfer of title was recorded in public records?
For specifics and updates, please get a copy of IRS Form 5405 and see a tax professional.
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