Have A Lucky Home

Many people think that buying a home in an unstable economy is very wrong. True enough if he or she cannot afford a mortgage. Besides that, home ownership is quite an investment. You have to be prepared for the maintenance, repairs and immediate pay-ups involved in purchasing. Therefore, if you are not financial equipped for these expenses, it is better not to pursue it.

However, because of the unstable company, eager homebuyers are given great benefits for purchasing their first house. Aside from the fact that most properties are affordable nowadays, tax credit is one of the greatest advantages they can get.

What is this all about?

People are having difficulty with their finances because of unemployment. And because of this, the real estate market has been greatly affected; thus giving negative impact to the economy as well. As a solution to this impending problem, an economic stimulus plan was created to help revive the slowing economy. Part of the economic stimulus package was the enactment of tax credit for homebuyers.

This was then shown on the Housing and Economic Recovery Act of 2008 and was later revised under the American Recovery and Reinvestment Act of 2009.

The concept of having this tax credit is similar to borrowing money without interest. The amount credited will be eventually repaid beginning 2010 for a 15-year period with 15 installments. That is just for the 2008 homebuyers. Since, it was revised on 2009, tax credit would become a liability only if the owner of the property will give up the house as his or her main residence within 36 months from the date of purchase.

Amount of Tax Credit

Tax credit amount is usually 10% of the purchase price. However, there is a ceiling amount which is $7,500 for 2008 purchasers and $8,000 for 2009.

This benefit is also subjected to Modified Adjusted Gross Income limits (MAGI). Basically, MAGI for singles and married couple (jointly) should amount to $75,000 and $150,000 respectively in order to qualify for the full amount. However, phase-out will begin if it exceeds the limit but no more than $20,000.

The Lucky Candidates

IRS has identified the qualification for this tax benefit. It will be granted to all people who purchased their primary residence (for the first time) between April 8, 2008 and December 1, 2009.

Take note of the following concepts: 

• First-time buyers are single and married couples who have not owned their primary residence for 3 years prior to purchase.

• Primary residence should be any property that you intend to go back to most of the time or even permanently. This means vacation homes and properties intended for business is out of the question. In addition, the property should be located within United States.

To file a claim, IRS has a form called 5405 that needs to be filled out. This will be used to determine the amount for the credit. After which, this form will be attached to another form called 1040 which is the federal income tax return. And that's just it. No other process is involved to file the claim.

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