How to Understand & Get the $7500 first-time Homebuyer Tax Credit

My wife & I recently purchased our first home (townhome) and will be receiving the 7,500 dollar first-time homebuyer tax credit on our 2008 tax return.

This article will help you fully understand what the credit is and how you can take it. There are plenty of articles out there, but this one will take you beyond the two steps 1)Buy a Home & 2)Take the Credit

Difficulty: Moderately Easy

Instructions

1. If you recently purchased a home or are thinking about buying a new home, you need to make sure the home qualifies.
   -Only a main home located in the United States qualifies.
   -You must buy the home after April 8, 2008 and before July 1, 2009.
   -You cannot purchase the home from a close relative such as a spouse, parent, grandparent, child, or grandchild.
   -You cannot get the credit if you owned another home at any time during the three years prior to the purchase date of your new home. For example, if you purchase your home on August 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another main home at any time from August 2, 2005, through August 1, 2008.

2. Determine the amount of your credit:
   -The credit is 10% of the purchase price of the home. The maximum credit that can be taken $7,500. This amount is available to a married couple filing a joint return or an individual filing a separate return.
   -If the purchase price of your home is greater than $75,000 than you qualify for the full credit. If you purchased a home for less than $75,000, please write an Ehow article on how you did it, and send me the link.

3. Consider the Credit Phase-out:
   -The credit is phased out based on your Modified Adjusted Gross Income (MAGI). For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For those filing an individual return, the phase-out range is $75,000 to $95,000.

4. Understand other important information:
   -The credit is fully refundable. This means that the credit will be paid out even if you didn't pay any taxes. (Also, if you can buy a home without any taxable income, please write an Ehow article).
   -The credit is not free. You must repay the money over the next 15 years. (500 per year). So the credit is more like an interest free loan from the government.
   -Claim the credit on Form 5405.

5. Provide your tax advisor with the necessary documents:
   -This includes the closing documents and mortgage documents.

6. FYI:
   - Do not sell your home before the end of the year.
   - The credit is not available to nonresident aliens.
   - You must use the purchased home as your main home.

7. Send me a message if you have any questions.

Tips & Warnings

• This article should not be used to avoid paying your taxes. Consult your tax advisor before implementing any information found in this article.

[Butterfli]

on 11/3/2008 Great information! Thanks!5*

[cadence]

on 11/3/2008 Great information. I have been trying to figure this out for months! Five stars!

[Wasatch]

on 10/30/2008 Great information. This should be a big boost to first time home buyers.