First Time Homebuyer Tax Credit

Many are talking about the first time homebuyer tax credit. President Obama has announced the stimulus package that is worth 787 billion dollars. This is great news because if you are first time homebuyer, you will have access to free money to purchase a home.

This opportunity will end on December 31st, 2009. and President Obama like others, believe that the stimulus bill will help those in the United States purchase a home.

If you are in the market, this first time homebuyer tax credit is an exciting time to purchase a home since home prices have fallen back to 2001 price levels. Obama's stimulus package has allotted up to 8 billion dollars for this program.

There are a few points below to note: First, there are some eligibility requirements to consider. This program is only available to the first time home buyers.

The second items to realize is that this program is not a loan and the tax credit does not have to be paid back. Please note that if you sell the home within three years of your purchase, the 8,000 dollar tax credit must be repaid.

The 8,000 dollars will be applied to the bottom line one's 2009 taxes. What this means is that if you owe the federal government 2,000 dollars in 2009, then 2,000 dollars will be subtracted from the 8,000 dollar tax credit to give one a refund of $6,000 for 2009. This is only an example to demonstrate the power of what this tax credit could mean to you or other first time homebuyers.

Keep in mind that this first time homebuyer tax credit program is only for primary residence purchases and this program is only available from between now and December 31st, 2009. This program is not good if the seller is the buyer's relative. Now is the perfect time to buy if you if fit these guidelines.

The other benefit you will have is the fact that there are plenty of homes on the market to pick from. Whether it be here in Arizona or somewhere on the east coast, houses are plentiful and there are plenty of real estate professionals to help you make the move!

As far as other requirements, a single person with an income of 75,000 dollars will not be eligible for this tax credit. Also, a married couple with a joint income of 150,000 dollars or more will not qualify for this tax credit.

Here is a brief overview of how the first time homebuyer tax credit works:

* Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.

* Applies only to those homes that are used as a taxpayer's principal residence.

* Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.

* Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

* Only the purchase of a main home located in the United States will qualify for this program valid until December 31, 2009.

* Vacation homes and rental property are not eligible for the tax credit.

* Taxpayers who previously owned a main home at any time during the three years prior to the date of purchase are not eligible for this credit. This means that first-time homebuyers and those who have not owned a home in the past three years prior to a purchase are eligible for the tax credit.

If you make an eligible purchase in 2008, you can claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you are allowed to choose the credit on either your 2008 (or amended 2008 return) or 2009 federal tax return.

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