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First Time Homebuyer Tax Credit

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First time homebuyers can claim a tax credit worth $8,000
as part of the Economic Stimulus Package. The credit is
effective as of January 1, 2009 and will expire December 1, 2009. You must close and move into your new
home by midnight, November 30, 2009.

First Time Homebuyer Tax Credit Information

Amount of Credit
Ten percent of the value of home or $8,000, whichever is less.

Refundable
No “repayment” required, unless home is sold within the first three years.

Eligible Property
Any owner occupied, single-family residence (including condos, co-ops) that will be used as a principal residence.

Definition of First Time Homebuyer
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

Income Limit
Full credit is available for individuals with modified adjusted gross of no more than $75,000 ($150,000 on a joint return). Partial credit is available for certain modified adjusted gross incomes.

Termination
December 1, 2009

Click here for First Time Home Buyers Tax Credit FAQs!



The legislation also would extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30.

The Senate's bill also created a $6,500 credit for those who buy a home after owning one for the last five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.

The Senate bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

"It's gonna put people back to work, the home builders, put people in the real estate business," said Sen. Chris Dodd, D-Conn. "The kind of jobs that can make a difference."

The extension will cost $10.8 billion over 10 years, according to the Joint Committee on Taxation.

Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS. Some portion of those returns, which the IRS couldn't specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time.

By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors.

"The data on the present home buyer tax credit show that the credit has had its intended impact -- sales have jumped in recent months to a projected 5.1 million for the year and housing inventory has been trimmed, thus stabilizing home prices noticeably," said Ron Phipps, the association's first vice president, in Senate testimony last month.

The credit, however, has also posed many problems. Critics say it's a waste of money because most of those claiming the credit would have bought homes anyway.

It's also been the target of fraud. Some 74,000 people claimed more than $500 million in credits even though they may not be first-time homeowners, according to Treasury officials. And more than 580 children, including some as young as 4-years-old, have claimed the credit.

"Some key controls were missing to prevent an individual from erroneously or fraudulently claiming the Credit and receiving an erroneous refund of up to $8,000," said J. Russell George, Treasury inspector general for tax administration, before a House subcommittee last month.