First Time Home Buyer Tax Credit
"What Is It?"
UPDATE!!: Must have been under contract by end of April 2010. Home must close by the end of June 2010 to qualify.
The First Time Home Buyer Tax Credit is part of the stimulus plan developed by the federal government
to help new home buyers and upgrading buyers afford the costs through a dollar for dollar tax credit.
$8,000 for first time home buyers and $6,500 for buyers who are upgrading to a larger home.
"Who Qualifies?"
To qualify for the $8,000 tax credit you can not have owned a home for the last 3 or more years.
The $6,500 repeat buyer tax credit requires the buyer to have owned and lived in the same primary residence for at least
5 years within the last 8 years. Otherwise, you don't qualify.
Examples:
Scenario 1: You owned a home but sold it over 3 years ago and have not since been a home owner - QUALIFIES FOR THE FULL $8,000 TAX CREDIT.
Scenario 2: You just sold a home that you owned for 3 years as your primary residence and are buying a new home - DOES NOT QUALIFY.
Reason: Must meet the minimum of 5 years in the same property to qualify for the $6,500 repeat buyer tax credit or not have owned a home for 3+ years to
qualify for the full $8,000.
Scenario 3: In the last 8 years you have owned two homes, neither for longer than 4 years a piece. - DOES NOT QUALIFY.
Reason: Must meet the minimum of 5 years in the same property to qualify for the $6,500 repeat buyer tax credit or not have owned a home for 3+ years to
qualify for the full $8,000.
Scenario 4: In the last 8 years you have owned your most recent home for at least 5 years. - QUALIFIES FOR THE $6,500 TAX CREDIT.
For more visit: http://www.irs.gov/newsroom/article/0,,id=206293,00.html
"What's the difference between a tax credit and a tax deduction?"
Tax Credits are a dollar for dollar amount that the IRS gives you back when doing your taxes.
For example, if you were getting
a refund for $1,000 before applying an $8,000 tax credit, your new refund would now be an additional $8,000 for a total of $9,000.
This is how the home buyer tax credit works as well.
Tax Deductions are a subtraction from the amount of income you are taxed on.
For example, if you made $30,000 last year and then applied
an $8,000 tax deduction, the new amount you would be taxed on would be $22,000. Your actual dollar savings would be the amount of money you
saved by not paying taxes on an additional $8,000 dollars.
ie. A hypothetical flat tax bracket of 25% would save you $8,000 X 25% = $2,000.
Your total savings would be that $2,000 that would have been the taxes paid on the $8,000 tax deduction.
