The Federal Government has EXTENED, ENHANCED & EXPANDED the Tax Credit for Home Purchases.
- Extension with increased income limits: If you haven’t owned a principal residence for 36 months, and you purchase a home, you can receive an income tax credit of up to 10% of the purchase price (maximum of $8,000 per married couple filing jointly, or $4,000 for single people or married couples filing separately) provided that
- You enter into the contract to purchase the home by April 30, 2010, and
- You close on the property by June 30, 2010, and
- Your income is no more than $125,000 for single taxpayers or $225,000 for married taxpayers filing jointly. If you’re single and you earn more than $125,000 but less than $145,000, you can qualify for a partial credit. Likewise, if you’re married and earn more than $225,000 but less than $245,000, you can qualify for a partial credit.
IMPORTANT: This is a CREDIT not a deduction … so you get the money! And, this money does not have to be repaid as long you stay in your new home for at least 36 months.
- Expanded to include “move-up” or “repeat” buyers: This is a new opportunity not available under the previous bill. An income tax credit of 10% of the purchase price of a new primary residence –up to $6,500 – is now available to current owners who
- Have owned and occupied their principal residence for at least 5 consecutive years of the last 8 years, and
- Are purchasing a home with a sale price of $800,000 or less
These “repeat” purchasers do not have to sell their current home, but they do have to declare the home they are purchasing as their “primary residence.”
TAX CREDIT AND MULTI FAMILY HOMES
Buyers who choose a multi-family home as their principal residence can also claim the credit, but only on that portion of the purchase price representing the portion of the home that will be their principal residence.
So, if you’re purchasing a multi-family home and you are going to live in one of the units as your principal residence, how do you know how much credit you can claim?
Simply divide the purchase price by the number of units. 10% of that amount is the amount of credit you can claim. For example, suppose you purchase a 2-family home for $400,000:
$400,000 divided by 2 = $200,000. $200,000 times 10% = $20,000
Of course, the maximum credit amounts of $8,000 for first-time buyers and $6,500 for repeat buyers still apply.
And don’t forget the important deadlines: Purchase agreements must be signed by April 30, 2010, and closings must be final by June 30.
The credit is claimed using Form 5405 at
http://www.irs.gov/pub/irs-pdf/f5405.pdf
As with all things having to do with income tax, check with your tax professional before proceeding. S/he will have the latest information and provide professional tax advice.