|By Alexander Carl on June 1, 2010
What is it? The first-time homebuyer credit is an incentive to perk up the housing market. It rebates 10 percent of your home price— up to $8000 for first-time buyers, and up to $6500 for previous buyers.
How does it work? To claim your credit, you must enter into a contract on your home by April 30, 2010, and close by June 30, 2010. Military service personnel and foreign federal workers can wait until April 30, 2011 to contract.
If you bought your home anytime in 2009, you can claim the credit on your April 15, 2010 taxes. If you bought it before November 6, 2009, you can also amend your 2008 tax return (if that helps you).
Cool. What’s the fine print? Funny you should ask, because there’s a lot of it. Here goes:
The highest household income allowed (adjusted gross) is $125,000 for single filers, and $225,000 for married couples.
You cannot claim the credit until you close the sale. (One way around this is to file your taxes early, and then amend your return after the sale is closed.)
You must file with paper to claim the credit. No electronic filing.
The limit of an eligible home’s value is $800,000.
You cannot claim the credit if you bought your home from a close relative— sibling, parent, grandparent, child— or from one of your spouse’s close relatives.
The home you buy must be your primary residence— the place you live for the majority of the year. Vacation homes and rental properties are not eligible.
You must be 18 and older to qualify.
You cannot be claimed as a dependent.
If you sell the home within three years, you are required to return the credit to the IRS.
So is the credit a good idea? Yes! Unless you are independently wealthy, any financial assistance right now is a plus. The stipulations of the credit are not harsh for most households.
Today is a homebuyer’s market: in most parts of the country, real estate is much cheaper than it was a few years ago. The credit exists to encourage sales— shoppers get a break, and sellers get an extra push. Go for it.
Note: Check back to see if Congress decides to extend the first time home buyers credit.