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$8000 HOME BUYER TAX CREDIT explained

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$8000 HOME BUYER TAX CREDIT explained

Postby GreenRealty » Wed Oct 14, 2009 9:14 pm

$8000 HOME BUYER TAX CREDIT explained -2009 Housing Stimulus bill

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The $789 billion economic stimulus package proposed by Obama government, contains a key housing stimulus bill designed to help first time home buyers in order to revive the US housing market. The Home Buyer Tax rebate and New Car Incentives are one of the most important incentives offered by the Government in 2009 Stimulus Package. If you are a first time home buyer planning to purchase a home in 2009, this housing stimulus can help you provide a refundable tax credit of 8000 USD. Read this entire post to understand the details of this housing tax credit and to find out if you qualify.

How does $8000 home buyer tax credit work?

In order to understand the details of the housing stimulus bill or $8000 home buyer tax credit you need to understand the following six important points.

1. What is the definition of First time home buyer?

The law defines "First time home buyer" as a home buyer who has not owned a principal residence for the last three years. For married tax payers, both you and your spouse must be 'first time home buyers' in order to qualify for the housing tax credit. For unmarried joint purchases, either of the qualifying partner may be a 'first time homebuyer'. In this case the $8000 housing tax credit can be allocated to any of the partners. If you have purchased a home 3 years ago and have rented it since then, then it does not count as principal residence and you may still be eligible for the $8000 first time home buyer stimulus. Both rental property and vacation homes do not count as principal residence. Moreover, if the new home you are purchasing is a mobile home or condo, and it is going to be your principal residence, you still qualify for the home buyer tax credit. Even building a home on a land (as opposed to purchasing a ready-made house) qualifies for the $8000 housing tax credit. Even non resident aliens who are not US citizens may qualify for this tax credit.

2. Dates of home purchase

In order to qualify for the home buyer tax credit, the first time home buyer must purchase the house between January 1 2009 and December 1 2009, both dates inclusive.

3. How much tax credit will home buyers get?

Although this tax credit is referred to as $8000 housing tax credit, remember that the total amount of tax credit a home buyer gets is equal to 10% of the purchase price of the new house up to maximum of $8000. Thus in order to get a full tax credit of $8000 your purchased property must be above $80,000 in value.

4.Income Limits for $8000 home buyer tax credit:

First time home buyers with modified gross annual income of $75,000 get full benefit of this housing tax credit. The tax credit is gradually reduced for those with income between $75,000 to $95,000 and finally a home buyer gets no tax credit if his/her modified gross annual income is more than $95,000. For married taxpayers, the home buyer tax credit is gradually reduced to zero for modified gross annual income between $150,000 to $170,000.

5. This is a Refundable Tax Credit

Remember that this is a tax credit and not a tax deduction. That is qualified first time home buyers deduct $8000 from their total tax owed to the IRS and NOT the total taxable income. Moreover a refundable tax credit means that in case the total taxes you owe to the IRS are less than $8000, you can actually get a refund for the balance amount!

6. This $8000 home buyer tax credit, unlike $7500 tax credit does not need to be repaid to the IRS

The earlier $7500 housing tax credit was essentially an interest free loan which the home buyers needed to repay in 15 years. However, although this $8000 home buyer tax credit may look only $500 more than the previous housing tax credit, it is all yours ! No need to repay it to the Federal government.


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