Who Can Claim the First-Time Homebuyer Tax Credit?

[Apr 23, 2009.]

 

Buying a home can be unobtainable for many people. But the government’s first-time homebuyer tax credit is aimed at easing some of the financial burden of homeownership. The tax credit is part of the Housing and Economic Recovery Act of 2008. Here’s what people who get a mortgage this year need to know about it.

Mortgage Loans Obtained in 2009

The first-time homebuyer tax credit for homes purchased in 2009 has been expanded from last year. Previously the credit was for up to $7,500 and was basically an interest-free loan that had to be repaid in 15 years. But the tax credit for homes purchased in 2009 is for up to $8,000, or 10% of the purchase price of a home, and does not have to be repaid.

Home Loan Closing Date Matters

In order to qualify for the tax credit you must buy a home before Dec. 1, 2009. That means the title needs to be transferred by that date. People who have not owned a home in the three years before the date of purchase are eligible for the tax credit. Taxpayers who owned a home outside of the U.S. that was their principal residence during the last three years may still qualify for the tax credit. However, vacation homes and rental properties are not eligible.

People who move out of their home within three years of the purchase date must repay the tax credit. So who doesn’t qualify for the first-time homebuyer tax credit?

—Couples filing a joint tax return who earn at least $170,000

—Single filers who earn at least $95,000

—People who buy their home from a close relative

—People who sell their home before the end of the year

—Nonresident aliens.

Incentives for Newbie Homebuyers

With mortgage rates so low, now is a good time for first-time homebuyers who have a down payment and good credit to start shopping for a home loan. But people who are eligible to claim the tax credit will need to prove they can afford a mortgage loan. Getting a home loan will still involve income and asset checks, as well as lenders scrutinizing their credit history.

First-time homebuyers can go here to begin comparing mortgage rates. Buying a reasonably priced home at a low rate and being able to claim the first-time homebuyer tax credit may be a hard-to-resist combination for people who’ve been waiting to become a homeowner.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.