First time home buyers tax credit Again, the home ownership and Business Assistance Act of 2009 was extended to the first-time homebuyer tax credit, which is capped at the maximum amount of $8,000. This particular part of the law only applies for first time home buyers and they have to purchase a primary residence. Vacation homes will not be qualified under this program. There is a program for returning home buyers. This can be used limited to $6,500 which I will discuss later in this article. To qualify, the first time home must be purchased following the 1st of January 2009, and prior to the 1st of May 2010. If a contract that is binding has been signed by April 30, 2010, then the homeowner will have until June 30, 2010 to sign the deal. With this new program, the Act has put the maximum amount of income at $125,000 for a single person and up to $225,000 for a married person if they are filing a joint tax return. The first time home buyer can choose to purchase a new construction or a resale house and both of them will qualify to receive the tax credit. The date of purchase is carefully we buy any house outlined as the actual closing date. After closing, the title to the property will be transferred to the first-time homeowner. Beware of young buyers, as you might not qualify for tax credits if your parents are claiming you as dependent. I've mentioned first time home buyers numerous times in this paragraph this paragraph, which means the buyer did not have any primary residence within the past 3 years preceding the purchase of the property. Be wary of this since it applies to your spouse, both the spouse and you need to meet the first time home buyer criteria to be eligible for your tax credits. The IRS is monitoring this rule very carefully, as last year , more than 500 under age folks got the deduction while one was just 4 years old. of age. It is no surprise that they will vigorously prosecute all violations. The method used to determine the amount of the tax credit is determined by taking 10% of purchase price of the home. If, for instance, you buy a home with a sale cost of $70,000, your tax credit would be equivalent to $7,000 and not the full sum of $8,000. If the sale price is $100,000, then you are eligible for the entire tax credit of $8,000 but not more. While the above examples are simple, make certain to speak with your tax advisor for specifics before making any final decision because your personal circumstances may be different. Be aware that you aren't able to claim tax credit for a future intended purchase, you must have actually closed and taken title to the property by June 30, 2010 to be eligible. The tax credit will be claimed at the close of the year , when you file your income taxes. To get an earlier benefit you can alter the amount of dependents you claim to increase your take-home pay each month by the entire amount of the tax credit that you'll receive. I strongly suggest to not alter your dependents without first consulting with a tax professional to make sure that the change is properly calculated. An error in your dependent's status can result in an unexpectedly large tax bill when the years come to an end. An additional restriction in the purchase of a new home is that the house is not able to be purchased through family members, or from any relatives of yours, like parents or grandparents. This applies to your lineal descendents such as grandchildren and children. Here's a fantastic bargain. For example, assume that you only owed $5,000 in your tax on income in the current tax year. If that's the case, how do you claim an income tax deduction of $8,000 when your tax bill was $5,000. You can do it easily, simply apply for the deduction of $8,000 and you'll receive a cash payment of your original $5,000 plus an additional refund of Uncle Sam for $3,000. The question is how do you counter this, right? Repeat Home Buyer Tax Credit (Move Up) The Home Ownership as well as Business Assistance Act of 2009 includes tax credits worth $6,500 for homeowners who have purchased multiple homes (a repeat home buyer is an existing homeowner) purchasing a principal residence between the 6th of November 2009 to April 30 in 2010. The deadline is extended until July 30, 2010,, if an unenforceable contract of sale is signed and ratified prior to April 30, 2010. Repeat home buyers can purchase any type of home in order to take advantage of the lower tax credit to the extent of $6,500. A buyer who is a move-up qualifies as a long-time-resident when he/she has owned and resided in his residence for at least 5 out of the last 8 years prior the purchase of this new home. For couples who are married, both must fulfill the above requirements. It's not a requirement that the new home be greater than the previous home, so some buyers can be called move-down buyers versus move-up buyers. It is anticipated that the majority will be move-up buyers.