Qualifying for First Time Homebuyer Tax Credit in Year 2010?

Last Revised on November 23, 2010

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First time homebuyer tax credit is a government tax and loan program that was started in year 2009. New York Times reported early in year 2010 that this tax credit will be extended for one or more years, so far no official report from the government has been released. Recently government extended this program for new homebuyers who purchased their house this year. This expansion has left many confused asking questions whether qualifications have changed or not. People who bought houses can get upto $8,000 (depending on the value of the property) that they can pay over a 15 year time period; it is interest free loan.

How do you qualify for first time homebuyer tax credit? The government has set up a very straight forward criteria and here are some of the most important facts about it:

The most important thing is that you should have bought a house on or before April 30, 2010; however, you can close the home purchase as late as June 30, 2010. In the meantime, don’t rush into buying a house and closing it on a bad mortgage finance rates with awfully high interest rates. You can claim this credit deduction either on your year 2009 or 2010 tax return file using form 5405.

When can I claim the credit for? The first time homebuyer tax credit is for those who purchased a home in year 2008, 2009 and 2010 for the purpose of residing there – that is you are going to use it as a homestead and not for business, vacation, etc. More than one and half million Americans have already taken advantage of this tax credit. How much refund would I get? The maximum amount of money you can get is the 10 percent of the amount your paid for your house and it can not exceed $8,000. The first time home buyers are those who haven’t owned a principle or primary residence over three years.

If you are worried that your income might be too high or you haven’t resided in your house long enough, here are the facts: your adjusted gross income can be as high as $125,000 if you are single and $225,000 if filing jointly married. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period and ended there on the date the new home is purchased as a replacement. Your settlement date has to be after November 6, 2009 though- because that’s  the day this new legislation was passed as a law and went into effect. The only difference  is your tax credit will be lower than the other new homebuyers.

Who doesn’t qualify into first time homebuyer credit program? Children who are under 18 years of age, dependents, homes purchased at the value greater than $800,000 or for the purpose of renting or vacation house or located in the US territories. And most importantly, if you sell the house within three years the credit will be recaptured and have to be returned back.

Latest Update First Time Home Buyer Tax Credit expired last year. But it has been extended for the military families. You may also qualify for this tax credit if you didn’t claim it during last year.

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One Response to “Qualifying for First Time Homebuyer Tax Credit in Year 2010?”

  1. Can I get the $8000 tax credit if I owe the irs back taxes? Says:
    November 23rd, 2010 at 6:18 pm

    I have some federal tax debt from 8 years ago. The IRS stopped trying to collect it several years ago because my income was low and I have a family. They do however keep my tax refund every year. My income has recovered some now, and I found a cheap house to buy. I qualify for the credit based on the income limits and I haven’t owned a house for 8 years, but I am wondering if they would pay me the credit or apply it to my back taxes?

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