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Answers About The Homebuyer Tax Credit**
1.
Who is eligible to claim the tax credit?
First-time home buyers purchasing any kind of home—new or resale—are
eligible for the 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 closing occurs and the title to the property transfers to the home
owner.
2.
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 tests the homeownership history
of both the home buyer and his/her spouse.
For example, if you have not owned a home in the past three years but
your spouse has owned a principal residence, neither you nor your spouse
qualifies for the first-time home buyer tax credit. However, unmarried
joint purchasers may allocate the credit amount to any buyer who
qualifies as a first-time buyer, such as may occur if a parent jointly
purchases a home with a son or daughter. Ownership of a vacation home or
rental property not used as a principal residence does not disqualify a
buyer as a first-time home buyer.
3.
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.
4.
Are there any income limits for claiming the tax credit?
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. The tax credit
amount is reduced to zero for taxpayers with MAGI of more than $95,000
(single) or $170,000 (married) and is reduced proportionally for
taxpayers with MAGIs between these amounts.
5.
What is "modified adjusted gross income"?
Modified adjusted gross income or MAGI is defined by the IRS. To find
it, a taxpayer must first determine "adjusted gross income" or AGI. AGI
is total income for a year minus certain deductions (known as
"adjustments" or "above-the-line deductions"), but before itemized
deductions from Schedule A or personal exemptions are subtracted. On
Forms 1040 and 1040A, AGI is the last number on page 1 and first number
on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of
2007). Note that AGI includes all forms of income including wages,
salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain
amounts such as foreign income, foreign-housing deductions, student-loan
deductions, IRA-contribution deductions and deductions for
higher-education costs.
6.
If my modified adjusted gross income (MAGI) is above the limit,
do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than
$8,000 are available for some taxpayers whose MAGI exceeds the phaseout
limits.
7.
Can you give me an example of how the partial tax credit is
determined?
Just as an example, assume that a married couple has a modified
adjusted gross income of $160,000. The applicable phaseout to qualify
for the tax credit is $150,000, and the couple is $10,000 over this
amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5
from 1.0, the result is 0.5. To determine the amount of the partial
first-time home buyer tax credit that is available to this couple,
multiply $8,000 by 0.5. The result is $4,000.
Here’s another example: assume that an individual home buyer has a
modified adjusted gross income of $88,000. The buyer’s income exceeds
$75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you
subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35
shows that the buyer is eligible for a partial tax credit of $2,800.
Please remember that these examples are intended to provide a general
idea of how the tax credit might be applied in different circumstances.
You should always consult your tax advisor for information relating to
your specific circumstances.
8.
How is this home buyer tax credit different from the tax credit
that Congress enacted in July of 2008?
The most significant difference is that this tax credit does not have
to be repaid. Because it had to be repaid, the previous "credit" was
essentially an interest-free loan. This tax incentive is a true tax
credit. However, home buyers must use the residence as a principal
residence for at least three years or face recapture of the tax credit
amount. Certain exceptions apply.
9.
How do I claim the tax credit? Do I need to complete a form or
application?
Participating in the tax credit program is easy. You claim the tax
credit on your 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. However, you will want to be sure that you qualify for the
credit under the income limits and first-time home buyer tests.
10.
What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for
the credit. This includes single-family detached homes, attached homes
like townhouses and condominiums, manufactured homes (also known as
mobile homes) and houseboats. The definition of principal residence is
identical to the one used to determine whether you may qualify for the
$250,000 / $500,000 capital gain tax exclusion for principal residences.
Source: www.FederalHousingTaxCredit.com
**How can Anderson Homes help?
As the ENERGY STAR® Leader, Anderson homes has exhibited leadership yet again by partnering with Wells Fargo Home Mortgage to create Priority Mortgage Company, LLC. The staff at Priority Mortgage is available work with Anderson Homes’ homebuyers to help them realize the dream of homeownership in a home that will outperform their expectations. For more information please visit www.prioritymortgagenc.com
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For additional information on the tax credit visit: www.FederalHousingTaxCredit.com
