New tax credit good news for first-time home buyers.
The recently approved federal stimulus package includes a lift for first-time home buyers, the IRS said Wednesday: Up to $8,000 in tax credit that doesn't have to be repaid.
Qualifying taxpayers who buy their first homes this year before Dec. 1 can get up to $8,000 in tax credit, or $4,000 each for married couples filing separately, under the American Recovery and Reinvestment Act of 2009. And they can choose to take it off their 2008 taxes, instead of waiting until they file their 2009 taxes next year.
The credit does not have to be repaid if the taxpayer keeps the home for 36 months, the IRS said.
"For first-time home buyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," IRS Commissioner Doug Shulman said. "This important change gives qualifying home buyers cash they do not have to pay back."
The move is a big improvement over the tax credit for first-time buyers that the IRS provided last year, which must be repaid in the coming years, said Marie Due, past president of the Eugene Association of Realtors.
The IRS has said that the previous tax credit for first-time buyers operated like an interest-free loan that must be repaid over 15 years.
But Realtors and would-be buyers found the credit complicated and unpopular, Due said.
"Nobody was using it - I wasn't promoting it at all," she said. " `Each year you're going to have to pay back `x' amount.' It was way, way, way, too complicated and it just didn't make sense."
Now the credit the IRS announced Wednesday is easy for Realtors to explain, Due said, and should be more appealing for first-time buyers.
For example, Due said, she is working with a Springfield couple in their 20s seeking a $150,000 starter home. The couple didn't have enough money for closing costs, but the tax break will enable them to borrow money from the woman's father and then repay the loan, Due said.
The tax credit "took them from talking about it ... to `We can do it now,' instead of waiting," Due said. "We need to get out there and tell people more about it. I don't know that there's a whole lot of people that know about it yet."
The tax credit can be claimed on 2008 taxes, which are due April 15, or 2009 taxes next year. First-time home buyers include those who did not own any other main home during the three-year period ending on the date of purchase this year, the IRS said.
Home buyers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.
The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, and $150,000 for joint filers, the IRS said.
The new law does not help people who purchased a home after April 8, 2008, and on or before Dec. 31 of last year. For these 2008 buyers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price up to $7,500, or $3,750 for married individuals filing separately.
The credit for those 2008 home purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year, the IRS said.
Visit IRS.gov for a revised version of Form 5405, which covers first-time home buyer credit. The form explains who can claim the credit, income limitations and repayment of the credit.
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|Title Annotation:||Business; Taxpayers may be eligible for up to $8,000 that does not have to be paid back|
|Publication:||The Register-Guard (Eugene, OR)|
|Date:||Feb 26, 2009|
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