Sunday, March 1, 2009

Who Gets the New $8,000 Credit and How Do You Get It?

The details are out on the new $8,000 tax credit for first-time homebuyers that is a part of the new economic stimulus act. Here are the essentials:

- If you buy a home after December 31, 2008 and before December 1, 2009, and you are a first-time homebuyer, you can get a tax credit of 10% of the purchase price, up to $8,000. If the purchase price is more than $80,000, you are eligible for the full $8,000.

- This credit is from the IRS, and you do NOT have to pay it back if you keep the house as your "main home" for 3 years.

- The IRS definition of a first-time homebuyer is different than the definition used to qualify for down payment assistance. You can get the credit if you (and your spouse, if you are married) did not own any other "main home" in the past 3 years. A "main home" is defined as the home you live in most of the time. That means you could have owned a house in the past three years and still get the tax credit, as long as the other house you owned was not your "main home".

- You can claim the credit when filing your 2008 taxes, even if you buy the house after you file your taxes. Just file an amended return and you will get the refund.

- If you purchased your main home last year - after April 8, 2008 and before January 1, 2009 - the credit is different. It's $7,500 and it has to be paid back over 15 years.

Both credits are claimed on the same IRS form. You can get to the IRS form and the instructions by going to our web site and clicking on the link on the bottom of our home page. Here's the link to our web site:

Remember, FHA rules allow a relative of a borrower to give the 3.5% FHA down payment to the borrower. They also allow a relative to LEND the down payment to the borrower. If a borrower does not have the down payment, they can borrow the money from a relative, file for the tax credit, and pay the relative back.

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