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Tax Credit to Aid First-Time Homebuyers

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If you buy your first home this year before December 1, 2009, you may be eligible for the expanded tax benefits of the First-Time Homebuyer Credit.

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before December 1, 2009, may receive a tax credit in the amount of 10 percent of the purchase price of the home. The credit may be as much as $8,000, depending on your filing status and income level. You have the option of claiming the credit when you file your 2008 tax return (due April 15), or you may claim the credit next year, when you file your 2009 tax return. If you are buying a home before December 1, 2009, but have already filed your 2008 tax return, you can claim the credit by filing an amended tax return for 2008 instead of waiting until next year to claim it on your 2009 tax return. The credit is claimed on Form 5405, First-Time Homebuyer Credit.

You do not have to repay this credit, provided the home remains your main home for 36 months after the purchase date.

Note: The expanded benefits for the first-time homebuyer credit made by the American Recovery and Reinvestment Act of 2009 apply only to homes purchased after December 31, 2008, and before December 1, 2009. For homes purchased after April 8, 2008, and on or before December 31, 2008, the terms of the first-time homebuyer credit were not as generous. For example, the maximum credit is only $7,500. Additionally, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

For purposes of the credit, regardless of whether you purchased in 2008 or in 2009, you are considered to be a first-time homebuyer if both you and your spouse (if you are married) did not own any other main home during the three-year period ending on the date of purchase.

For more information and answers, go to First-Time Homebuyer Credit, and IRS Information Related to the American Recovery and Reinvestment Act of 2009 on www.irs.gov.