How to get $8,000 Home Buyer Tax Credit

09Mar09

President Barack Obama signed the American Recovery and Reinvestment Act of 2009 into law on February 17, 2009. The bill calls for a tax credit of up to $8,000 for
First Time Home Buyers, who purchase their first home between January
1, 2009 and December 31, 2009. The actual tax credit is for 10% of the
home’s value or $8,000, whichever is less.

If you’ve been waiting for the right time to purchase a home, now is a great time. Especially in Phoenix where house prices are very attractive.

Here’s a Q & A on what all this means:

Question? What is a tax credit?
Answer: Tax credits are sometimes confused with tax deductions, but they are not the same. A tax credit is a dollar for dollar decrease in the amount of taxes owed, whereas a tax deduction is a decrease in the amount of taxable income. A tax credit is usually much better.

Question? What is a first time home buyer? 
Answer: The federal government defines a first time home buyer as those who are buying a primary residence and have not owned a home in the past 3 years.

Question? What time period is covered by the incentive?
Answer: The purchase date, which is the date the home closes escrow, must be between Jan. 2009 and December 2009. First time buyers that applied for the $7,500 tax credit may still opt for the $8,000 tax credit by filing an amended tax return using the 1040X form.

Question? What is the purchase price and income requirements for receiving the full $8,000.
Answer: The tax credit is good for 10% of the purchase price of the home up to the full $8,000. For example: if you purchase a home for $70,000 the tax credit would be $7,000. If the purchase price is $100,000 the full $8,000 tax credit would be available. To receive the full tax credit, the purchasers annual “modified adjusted gross income” as defined by the IRS must be no more than $75,000. A married couple’s combined must be no more than $150,000.

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