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First time home buyer tax credit

If you are looking for your first home the IRS will give you an $8,000 tax credit (maximum, or 10 percent of the sales price, whichever is less) on your federal tax return if you close escrow by April 30, 2010. The credit applies to homes purchased for $800,000 or less, and the credit does not require repayment if you live in this residence for three or more years. If you or your spouse have not owned a home in the last three years you qualify for this credit.

The full $8,000 credit is available to married couples filing a joint return whose modified adjusted gross income is $150,000 or less. You must be 18 on the date of purchase.

Exisiting Homeowner Tax Credit

If you already own a home, but  you want to move up, theres something for you too. Congress also granted existing homeowners a tax credit of up to $6,500 maximum or 10 percent of the purchase price, whichever is less.

To be eligible for this credit you must have lived in your current home for for five consecutive years out of the last eight and must purchase a new or existing home by April 30, 2010. You do not need to sell your current home to qualify for this credit. Single buyers with incomes up to $125,000 and married couples with incomes up to $225,000 may receive the maximum tax credit. Buyers with a written binding contract on April 30, 2010 have until July 1, 2010 to close escrow.

What’s the catch?

No catch. Neither tax credit requires repayment if you occupy the home for three years or longer. buyers who combine these credits with low intterest rates and low median sales prices will have a once in a generation chance to purchase more hme for their dollars.

Claim it

Use IRS form 5405 to claim either credit; the IRS requires a copy of your HUD 1 Settlement Statement to verify the purchase.

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