The New “New” First Time homebuyer credit.

March 11, 2009 by: The Tax Man

The President signed new legislation into law last month that allows a first-time homebuyer purchasing a primary residence to be eligible for a tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when title to the property transfers to the home owner.

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The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

The new law also defines who is a first-time home buyer. This may seem like an obvious answer but the law says a ‘First-time home buyer” is a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the homebuyer and spouse. So if you owned a home in the past you may still qualify if you have not owned a home for more than three years.

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. If your income exceeds $95,000 (single) or $170,000 (married) then you will not be eligible for the credit.

The last first time homebuyer credit needed to be repaid, this credit does not need to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan.

You may also elect to receive the credit on your 2008 return if your income allows you to qualify in 2008. You may claim the credit even if you have already filed your 2008 tax return. If you have filed your 2008 and return and wish to qualify for the credit you will need to file an amended return, known as a 1040X.

There are still some instances when you are not able to claim a credit. These include non-first time homebuyers, those claiming the Washington DC first time homebuyer credit, non-resident aliens and those who purchased a home in 2008. If you purchased a home in 2008 you may be eligible for the previous first time home buyer credit.