by B. Leslie Baird

Created on: December 20, 2009   Last Updated: March 13, 2010

The first time home-buyers credit is a wonderful opportunity for qualified buyers to save extra money on their home purchase. It is designed to help more people purchase a home and stimulate the housing market. There are a number or rules the buyer must follow to qualify for this credit and due to the amount of credit available it is important to fully understand these conditions when making a purchase. Buyers should also keep up with any changes in this credit as the credit was expanded in November of 2009. To take advantage of the credit you must file a paper return with all documentation attached.

1) The home being purchased must be a principle residence for the buyer and located in the United States. A rental or vacation property will not qualify.

2) The home must be purchased after April 8th, 2008 and before May 1st, 2010. The closing date for the sale must be before July 1st, 2010.

3) Under general requirements the taxpayer and the taxpayers spouse can not have owned a principle residence for three years before the date of the new home purchase.

4) However, a home buyer can receive a smaller credit of up to $6,500 if the purchase is a replacement home made after November 6th, 2009 and they lived in their previous home for five consecutive years out of the last eight years.

5) For homes purchased in 2008 the credit operates like an interest free loan. The full amount of the credit must be repaid over a fifteen year period.

6) The credit is ten percent of the purchase price up to $7,500 for homes purchased before 2009. For homes purchased from the beginning of 2009 to May 1st of 2010 this maximum amount is $8,000. For the long time homeowners credit for a replacement purchase this amount is $6,500.

7) The buyer may purchase a new or used home.

8) Mobile homes can qualify for this credit and if the buyer purchases the land for the mobile home, the land price will be included in the amount calculated for the credit. Travel trailers that are affixed to the land can also qualify.

9) The taxpayer can not be a minor to qualify for the credit. However, purchases made by minors before November 6th, 2009 may qualify.

10) The credit amount for homes purchased in 2009 and later is a refundable credit. This means that the credit does not just reduce the amount of taxes owed but can be received as a full refund on the taxpayers return.

There are income limits that apply to this credit. Purchases made before November 6th, 2009 begin to phase out at $150,00 for married tax payers and $75,000 for single tax payers. For purchases after November 6th, 2009 this phase out starting point is increased to $225,000 for married taxpayers and $125,000 for singles.

Reference:

http://www.irs.gov/newsroom/article/0,id=206291,00.h tml

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