First Time Home Buyer Tax Credit

With the passage of the American Recovery and Reinvestment Act of 2009, first time home buyers can qualify for up to an $8,000 tax credit depending on your adjusted gross income (AGI). The tax credit is equal to 10 percent of a home purchase prices up to a maximum of $8,000.

To qualify for the tax credit, a home purchase (closing date) must occur on or after January 1, 2009 and before December 1, 2009. Unlike the first tax credit for a home purchase passed last year, this credit doesn't have to be paid back.

First time home buyer qualifications, limits and tips:

• The law defines a 'first time home buyer" as someone who hasn't owned a home for a three year period prior to the purchase.
• Vacation homes and rental property do not qualify for this credit.
•  Income limits: For single taxpayers the limit is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
• First-time home buyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return
• Their is no obligation to repay the credit unless the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.

First-Time Home Buyer Credit: Scenarios

1. Eligibility for the first-time home buyer credit is determined on the date of purchase. If  a first-time home buyer, buys a house and then later that year marries someone who is not a first-time home buyer, the credit is allowable to the first time home buyer who can take the maximum credit allowed.
2. A single first-time home buyer buys a home and a parent cosigns for the mortgage. The single first time home buyer can still qualify for the credit but the parent cannot claim any portion of the credit.
3. A person owned his principal residence. Several years ago, he decided to relocate to a rented apartment, but did not sell his  former residence. Instead, he rented it out. Now he plans to buy another house and make it his new principal residence. He does qualify for the credit as long as he hasn't owned and used a home as his primary residence in the last three years.

To receive the home credit you will need to fill out IRS form 5405 when you file your federal income taxes.