How to Get The First Time Home Buyer Tax Credit

Learn how to get the first time home buyer tax credit.

Perhaps you have heard about the first-time home buyer tax credit, and you want to find out if you are eligible to receive it.

The tax credit, worth up to $8,000, is a federal incentive to encourage first-time home buyers to enter the real estate market to buy a home, and to take advantage of the current affordable home prices and low mortgage loan interest rates.

There are a few requirements to get the first time home buyer tax credit:

Difficulty: Moderately Easy

Instructions

1. To claim the tax credit, you must be a first-time home buyer. If you have owned a home in which you lived as a primary residence in the past three years before the new home's purchase date, you cannot claim the tax credit. To claim the 2009 tax credit, you must purchase your home between January 1 and December 1, 2009.

2. To receive the credit of up to $8,000 you have to purchase a home of up to or equal to 10% of the purchase price of a home. Though many homes are priced far above $80,000, the tax credit maximum is capped at $8,000. The tax credit may not be used for funds intended for a down payment on a property.

3. To qualify there are income restrictions that apply to a homeowner’s eligibility to claim the 2009 tax credit. The tax credit is available to single home buyers who have an adjusted gross income of $75,000 or less, while married couples can claim the tax credit if their combined incomes do not exceed $150,000.

4. Home buyers claiming the tax credit must own their qualifying home for a minimum of three years. If a homeowner sells the home before then, the credit must be returned to the federal government. Exceptions are made if you divorce during the three-year period.

5. Unlike the requirement to repay the home buyers tax credit of 2008, which was up to $7,500, you do not have to repay the 2009 tax credit. In order to claim the tax credit, you will need to fill out an IRS form (form no. 5405). This form will help you calculate the amount of the tax credit you qualify for based on your income and the home's purchase price. The next step would be to amend your 2008 tax return with the completed form 5405. A second option would be to wait to file the form with your 2009 taxes in April 2010.

6. Be sure to take a look around for more tips and information about the first time home buyers tax credit.

[billips]

on 10/28/2009 Good article - this is really important information, especially for young people - 5* - B.