How to Choose Between the 2008 or 2009 First Time Homebuyers Tax Credit

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By kip29
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Choose Between the 2008 or 2009 First Time Homebuyers Tax Credit

In February, President Obama signed into law the American Recovery and Reinvestment Act of 2009. This $787 Billion economic stimulus package is intended to help jump start our faltering economy.

There are many different provisions of the American Recovery and Reinvestment Act, including over $200 billion in individual tax relief. Part of the individual tax relief is intended to help first time home buyers.

The First Time Home Buyers Tax Credit is offered to citizens who have purchased a home and have not owned a primary residence over the last three years. The tax credit is based off of 10% of the homes value or up to $8,000. To qualify for Obama's First Time Home Buyers Tax Incentive, the home must have been purchased between January 1, 2009 and December 1, 2009.

This is not the first time the federal government has created an incentive for new homebuyers. Last year, congress passed the Housing and Economic Recovery Act of 2008, which included a provision that offered $7,500 to new home buyers. In order to qualify for the First-time homebuyers tax credit of 2008, the home must have been purchased between April 8, 2008, and before Dec. 1, 2009.

While both of these incentives can really help a first time homeowner, the 2009 First Time Home Buyers Tax Credit does NOT need to be repaid. However, the 2008 tax credit is treated as a no interest loan and must be repaid over the course of 15 years starting in 2010.

For both tax incentives, the homebuyer, as well as their spouse, must not have owned a primary residence over the last 3 years.

The First Time Home Buyers Tax Benefit can greatly help out new homeowners, but deciding which tax incentive to take advantage depends a lot on the situation of the buyer.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

Have purchased a home between April 2008 and December 01, 2009
Knowledge of your income and that of your spouse.

Step 1

First you must consider when the home was purchased. Homes that were purchased in 2008 will not qualify for the 2009 tax credit. However, homes purchased in 2009 can qualify for either the 2008 or the 2009 credit.
Step 2

Next, it is important to consider your income. In order to receive the 2009 tax credit, you must make less than $75,000 a year or $150,000 for married couples. The 2008 tax credit has similar requirements.
Step 3

It is also important to consider how long you intend to stay in the home. Both of these tax credits will need to be repaid if you live in the home for less than 3 years.

If you do not intend to live in the home for at least three years, it may be a good idea to go with the 2008 tax credit, which is treated as a no interest loan. This way, you can begin paying it back before you move out of the home, as you will need to do this anyway.

Tips & Warnings

These tax credits can be claimed on either your 2008 or 2009 income tax return. People that have already filed their tax return can submit an amended 2008 tax return to receive the tax credit early.
You do not have to owe any taxes or have any income to claim either of these tax credits. A check will be sent for the total amount of the credit, minus anything that you owe in taxes.
If you move from the home or sell it within 3 years, you will have to repay both of these tax credits.

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