Expired 04-30-10
See Explantion Section Below...
or Click Here for information on the Extention.
AMERICAN RECOVERY AND
REINVESTMENT ACT OF 2009
Get more info on getting your money sooner, just click on the IRS logo above.
HOUSING TAX CREDIT FREQUENTLY ASKED QUESTIONS (FAQ)
On February 17, 2009 President Obama signed the American Recovery and Reinvestment Act of 2009 into law.
In particular, the law authorizes a tax credit of up to $8,000 for qualified first-time home buyers
purchasing a principal residence on or after
January 1, 2009 and before December 1, 2009. Extended untill
04-30-10
EXPIRED
MHI has provided the following guidance on how the housing tax credit would impact our customers.
(Please note: This is guidance only, and you should contact a professional tax
consultant for a fuller explanation of any particular provision.)
Who is eligible to claim the tax credit?
First-time home buyers purchasing a principal residence—either new or resale—are
eligible for a tax credit of up to $8,000. To qualify for the tax credit, a home purchase
must occur on or after January 1, 2009 and before December 1, 2009. Extended untill 04-30-10
EXPIRED For the
purposes of the tax credit, the purchase date is the date when closing occurs and the
title to the property transfers to the home owner. The tax credit will be administered
through the Internal Revenue Service (IRS).
What is the definition of a
first-time home buyer?
The law defines "first-time home buyer" as a buyer
who has not owned a principal residence during the
three-year period prior to the purchase. For married
taxpayers, the law reviews the homeownership history
of both the home buyer and his/her spouse.
Does this tax credit apply to manufactured and modular homes?
YES. Any home that will be used as a principal residence will qualify for the credit
including manufactured homes, modular homes, site-built homes, even houseboats!
This also includes homes placed on private land or in a land-lease community, a park, a condominium, or a cooperative. Homes financed using a personal property loan, (Home only) and Land Home are eligible as well as cash purchases.
How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum
of $8,000.
What exactly is a tax credit?
A tax credit is a dollar-for-dollar reduction in what the
taxpayer owes. So a taxpayer who owes $8,000 in
income taxes and who receives an $8,000 tax credit
would owe nothing to the IRS.
What does it mean that the credit is “refundable”?
The fact that the credit is refundable means that the home buyer credit can be
claimed even if the taxpayer has little or no federal income tax liability to offset.
Typically this involves the government sending the taxpayer a check for a portion or
even the entire amount of the refundable tax credit.
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does
that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"
The short answer? Yes, You would get back the $8,000 plus what you have overpaid. The long answer?
It depends. Here are three scenarios:
Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck
and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe,
you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll
witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000
credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by
$1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax
credit pays your bill, and you get the remaining $7,000 as a refund.
How is this home buyer tax credit different from the last tax credit
that Congress enacted in July of 2008?
This new provision is a true “credit” and does not have to be repaid, unlike the
previous one, which was essentially an interest-free loan. However, home buyers still
must use the residence as a principal residence for at least three years or else return a
portion of the tax credit amount.
What are the income limits for individuals claiming the tax credit?
1) For single-taxpayers with a modified adjusted gross income (MAGI), as defined by
the IRS, under $75,000 or married taxpayers filing a joint return with a MAGI under
$150,000, the full $8,000 tax credit amount is
available.
2) For single-taxpayers with a MAGI over
$75,000 or married taxpayers filing a joint return
with a MAGI over $150,000, the credit is reduced
proportionally using a phase-out.
3) For single-taxpayers with a MAGI of more
than $95,000 or married taxpayers filing a joint return with a MAGI over $170,000,
the tax credit is reduced to zero.
Partial credits of less than $8,000 are available for some homebuyers whose MAGI
exceeds the phase-out limits.
All homebuyers should consult with tax
professionals to calculate the exact amount they are eligible to receive.
How do homebuyers claim the tax credit?
Homebuyers will claim the tax credit on their federal income tax return. Specifically,
home buyers should complete IRS Form 5405 to determine their tax credit amount,
and then claim this amount on Line 69 of their 1040 income tax return. No other
applications or forms are required, and no pre-approval is necessary.
Can someone who is not a U.S. citizen claim the tax credit?
Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a
principal residence in the previous three years and who meets the income limits test
may claim the tax credit for a qualified home purchase.
The IRS provides a definition
of "nonresident alien" in IRS Publication 519.
Can a homebuyer apply the tax
credit against their 2008 tax return?
Get more info on how to get your money sooner by clicking on the IRS logo above.
Yes. The law allows taxpayers to choose to
treat qualified home purchases in 2009 as if
the purchase occurred on December 31,
2008. This means that the 2008 income limit
(MAGI) applies and accelerates when the
credit can be claimed (tax filing for 2008
returns instead of for 2009 returns). A
benefit of this election is that a home buyer
in 2009 will know their 2008 MAGI with
certainty.
Taxpayers buying a home who wish to claim it on their 2008 tax return, but who
have already submitted their 2008 return to the IRS, may file an amended 2008
return claiming the tax credit.
Also, prospective home buyers who believe they qualify for the tax credit are
permitted to reduce their income tax withholding. Reducing tax withholding (up to
the amount of the credit) will enable the buyer to accumulate cash by raising his/her
take home pay. This money can then be applied to the down-payment.
Details of Extention
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All homebuyers should consult with tax professionals to determine how to
arrange this.
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