Cincinnati Area Real Estate: Article $7500 First Time Buyer IRS credit

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What follows is a summary of the IRS Guidelines regarding the $7,500 'first-time homebuyer credit": General: Congress recently enacted the First-Time Homebuyer Credit which can be claimed on IRS Form 5405; HOWEVER, THE CREDIT IS IN REALITY A NO-INTEREST LOAN THAT MUST BE PAID BACK OVER 15 YEARS. How Much is the Credit?: 10% of the purchase price with a maximum credit of $7,500 for either a single or a married couple filing a joint return. 10% for a married person filing a separate return up to $3,750. The full credit is available for homes costing $75,000 or more. Which Homes Qualify? Must be located in the U.S. Must be purchased after April, 2008, and before July1, 2009. For new construction, the purchase date is the date you first occupy the home. Taxpayers who owned a main home during the three (3) years prior to the date of purchase are NOT eligible for the credit. IF YOU MAKE AN ELIGIBLE PURCHASE IN 2008, YOU CLAIM THE FIRST-TIME HOMEBUYER CREDIT ON YOUR 2008 RETURN. FOR AN ELIGIBLE PURCHASE IN 2009, YOU CAN CHOOSE TO CLAIM THE CREDIT ON EITHER YOUR AMENDED 2008 RETURN OR 2009 RETURN. When Must I Pay Back the Credit?: You must begin paying back the credit/loan the second year after claiming the credit. For example, if you properly claim the maximum available credit of $7,500 on your 2008 return, you must begin repaying the credit by including 1/15th of this amount or $500 as an additional tax on your 2010 federal tax return; thereafter, $500 per year from 2010 through 2024. Exceptions to the Repayment Rule: If you die and are single, any remaining installments are NOT due If you die and are married both claiming the credit, your spouse must repay his/her one-half. If you stop using the home as your main home, all remaining installments become due on the year that occurs. This includes situations where the main homes becomes a vacation home or is converted to business use or rental property. There are some rules for involuntary conversions. If you sell your home, all remaining installments become due on the return for the year of the sale. The repayment is limited to the amount of GAIN on the sale if the home is sold to a unrelated buyer. If the sale results in a loss or there is no gain, the remaining installments may be reduced or even eliminated. (this requires professional assistance). If you get divorced and transfer to your spouse, he/she then become responsible for the remaining installments. Are there income limits? Yes, the credit is reduced or eliminated for high income taxpayers. The credit is phased out based on our modified adjusted gross income (MAG). For a married couple filing a joint return, the phase-out range is from $150,000 to $170,000. For other taxpayers the phase-out range is $75,000 to $95,000.. What if two homebuyers are unmarried? Two unmarried individuals buying a principal residence may allocate the credit among themselves in any reasonable manner. The total amount allocated between the owners may not exceed the lesser of $7,500 or 10% of the purchase price. Resident Aliens with an iTIN are eligible to take this credit. Even if you don't owe taxes and didn't have taxes taken from your pay, you are still eligible. The credit is fully refundable. Who cannot take the credit? Your home financing comes from tax exempt mortgage revenue bonds You buy the home from a close relative, including spouse, parent, grandparent, child or grandchild. I hope this is helpful.

Kim Schieldknecht