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If you are thinking of purchasing a home in the next year, you should be aware of the tax credit that is available to first-time homebuyers.
In February, Congress passed the American Recovery and Reinvestment Act, which provides first-time homebuyers with a tax credit of 10 percent of the purchase price of a home up to $8,000 or $4,000 each for married persons filing individually. This credit can be used on the 2008 tax returns, due April 15, or 2009 tax returns due next year. Qualifying taxpayers must purchase a home by Dec. 1 to be eligible.
First-time homebuyers do not necessarily have to go through a real estate agent to receive the tax credit. Homes that are "for sale by owner" also are eligible. However, individuals who purchase a home from a family member are not eligible.
The amount of credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000 for singles or $150,000 for joint filers.
The 2009 credit should not be confused with the tax credit offered to first-time homebuyers in 2008. The 2008 tax credit gave taxpayers the equivalent an interest-free loan equal to 10 percent of the purchase price of a home up to $7,500, or $3,750 for married individuals filing separately. These funds must be paid back to the government over 15 years, beginning with the 2010 tax year. Funds may need to be paid back earlier if the home is sold. The 2009 tax credit does not have to be paid back by homebuyers, provided the home remains their main home for 36 months after the purchase date.
Prospective homebuyers have several filing options available to them. If you're interested in purchasing a home, you should review each of these options and decide which would be most advantageous. While time is running out to file 2008 tax returns, it is still possible to include the first-time homebuyer credit on your 2008 tax returns if you plan to buy a home in the next few months.
Taxpayers, who have not filed their taxes yet and are planning on purchasing a home in the next few months, may want to consider requesting an extension from the Internal Revenue Service. The benefit of putting the homebuyer tax credit on the 2008 tax return is that you will receive your money faster. An extension is good for six months, which would make 2008 taxes due Oct. 15. Extension requests must be filed by April 15.
If you are due to receive a sizable refund already, you may want to go ahead and file your 2008 tax returns and claim the credit later in the year by submitting an amended return. Amended returns also can be submitted if you have already filed your 2008 tax return, but buy a home before Dec. 1.
However, some first-time homebuyers may find it more beneficial to use the tax credit toward the 2009 tax return next year. Some may qualify for a higher credit on the 2009 tax return if their adjusted gross income in 2009 drops below the credit phase out levels of $75,000 for singles and $150,000 for joint fliers.
For more information on the first-time homebuyer tax credit, visit the Internal Revenue Service Web site at IRS.gov. More information on the Recovery and Reinvestment Act can be found at www.recovery.gov. Questions may also be directed to your tax preparer or the Internal Revenue Service at 800-829-1040.
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