A number of first-time homebuyers have already taken advantage of the tax credit when purchasing a home in Briar Chapel, and so can you!In case you haven't already heard, Congress recently approved an $8000 First-time Homebuyer Tax Credit for principal residences purchased between Jan 1st and Dec 31st, 2009, with no requirement for payback. Since I'm often asked about this tax credit, I thought I would share some of the most frequently asked questions here:
1) Who is eligible for the tax credit? Only first-time homebuyers are eligible. Someone is considered a first-time buyer if s/he has not had any ownership interest in a home in the three years prior to the day of the 2009 purchase.
2) How much is the incentive worth? Any home that is purchased for $80,000 or more qualifies for the full $8000 credit. Otherwise, if the home costs less than $80K, the credit will be equal to ten percent of the purchase price (i.e. $7500 credit on a $75K purchase).
3) How does the tax credit work? Every dollar of the tax credit reduces your income tax by a dollar. All you have to do is claim the credit on your individual income tax return. In other words, a qualified purchaser would first calculate their total tax due and then reduce this amount by the applicable credit. For example, if someone has a tax liability of $8,500 and is eligible for the full $8000 credit, they can reduce the total tax due to $500. In the event that someone is eligible for the full credit, but they entire tax liability for the year is only $6500, then the IRS would send them a check for $1500.
4) How do I apply for the credit? There is no pre-purchase authorization, application or similar approval process. Eligible homebuyers simply claim the credit on their tax return. The credit will be reflected on a new Form 5405. Visit the IRS website for more details.
PLEASE NOTE: I'm a real estate broker, not a financial advisor! Therefore, I strongly encourage you to talk with a CPA or tax specialist if you have any questions or concerns about this program and its impact on your tax liability. Otherwise, if you'd like to put the credit to good use, and purchase a home in Briar Chapel, I'm here to help!
