Tax Credit for First-Time Home Buyers
Mar 30 2009
The IRS extended the First-Time Homebuyers Credit from last year and improved upon it. For homes purchased under the 2008 program, the credit was worth up to $7500 and it was actually an interest-free loan. The $7500 had to be paid back over the next 15 years.
For homes purchased under the 2009 program, the credit is worth up to $8000. Unlike last year, this credit does not require repayment unless the home ceases to be your main home within 36 months of purchase. The credit amount varies. You can claim the smaller amount of 10% of the purchase price OR $8000.
The program applies to:
• First-time home buyers. “First-time” home buyers are people who did not own any other main home during a 3-year period prior to your home purchase.
• Home purchases in the U.S. between April 9, 2008 and before December 1, 2009.
A “main home” is one where you live most of the time. It can include single family homes, townhouses, condos, houseboats, house trailer, or other types of residences.
The credit does have restrictions. The credit is phased out with income on line 38 of your Form 1040 of $95,000 for single filers or for married filing jointly, $170,000. See the IRS web site for more information and disqualifying rules; http://www.irs.gov/newsroom/article/0,,id=204671,00.html.
If active duty personnel were to buy a home and take advantage of the American Recovery and Reinvestment Act of 2009 (ARRA) provision allowing up to an $8,000 tax credit for a new home buyer, what will happen when he is transferred and the newly purchased home is no longer his “main home”? According to IRS Form 5405, instructions, page 2,
Homes purchased in 2009. You must repay the credit
only if the home ceases to be your main home within the
36-month period beginning on the purchase date. This
includes situations where you sell the home, you convert
it to business or rental property, or the home is
destroyed, condemned, or disposed of under threat of
condemnation. You repay the credit by including it as
additional tax on the return for the year the home ceases
to be your main home. If the home continues to be your
main home for at least 36 months beginning on the
purchase date, you do not have to repay any of the
credit.
Most military personnel receive transfer orders every 2 to 3 years. Therefore the $8,000 tax credit is effectively unavailable to active duty military personnel. Not much of a reward for serving your country.
Does the home have to be bought in the service members home of record to qualify? or can it be in another state where is duty station is and he retains his home of record in another state?
Thank you.