The Worker, Homeownership, and Business Assistance Act of 2009 provides that new or first-time home buyers can qualify for tax cuts. They can avail of ten percent of the property's purchase price up to $ 8,000 as tax credit.
Under this provision, the first-time home buyer is defined as somebody who did not own a principal home within three years before the qualifying home was purchased. This applies to the person's spouse, as both married taxpayers' home ownership history will be verified.
Taxpayers' dependents and those younger than 18 years of age are not eligible for the tax credit program. Also, the tax credit is applicable only to homes not more than $ 800,000, and will be paid back if the property is sold or once it is no longer the buyer's principal home within three years after it was acquired.
Income limits of $ 75,000 for individual taxpayers and $ 150,000 for married or joint filers are eligible for the refundable tax credit if the primary residence was purchased between 01 January 2009 and 06 November 2009. Tax credit also applies to those with income not exceeding $ 125,000 for single taxpayers and $ 225,000 for married couples if the home was purchased between 06 November 2009 and 30 April 2010.
Official forms have to be completed and some documentations are required for buyers to claim the tax credit. They need to complete IIRS Form 5405, which has to be attached with the HUD-1 settlement form.
Where the HUD-1 is not applicable, a copy of the certificate of occupancy can be used in its place. For homes purchased in 2010, buyers can choose to claim refund on either the 2009 or 2010 tax return. You should speak to a professional about which is the more optimal approach to take when making your decision as this can affect the amount of savings you experience.
In order to be eligible for the tax credit, the transaction should have taken place between 01 January 2009 and 30 April 2010. If the binding deed of sale was signed by 30 April 2010, it must be consummated on or before 30 June 2010.
Proposals have been made recently for an extension of the deadline to be moved to 30 September 2010. Various real estate groups have claimed the new tax credit scheme has resulted in a major rush of real property purchases, which led to a huge backlog of sales completion .