• A first time home buyer is defined as someone who has not owned a home in the last three years
• The credit amounts to 10% of the purchase price of the home not to exceed $8,000
• The tax credit does not need to be paid back if you continue living in the home as your primary residence for three years without selling it
• The home must be purchased before December 1, 2009
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit
• You cannot purchase the home from a related party like a spouse, direct ancestor, or direct lineal descendent (child or grandchild); however, you can still qualify for the credit if you purchase a property from siblings, nephews, nieces, and others
• If you are married, both spouses must be first-time home buyers
• If more than one unmarried individual is buying the property, the credit can be split up among all the individuals who qualify. However, the total credit taken cannot exceed $8,000
How does the tax credit work?
A tax credit is kind of like a gift certificate that you can use to pay your taxes - it reduces your income tax bill on a dollar for dollar basis. Imagine paying your bill at IRS Restaurant, and then later getting an IRS Restaurant gift certificate. Normally, you would need to go back to IRS Restaurant and buy more food in order to use your new gift certificate. But what if IRS Restaurant allowed you to just turn in your gift certificate for cash? That's how this tax credit works. One of the greatest benefits of the $8,000 credit is that you can claim it on your 2008 tax returns, even if you buy a home in 2009. All you need to do is file an amended tax return with the IRS after you buy your new home and they will send you a refund check for $8,000. Just like the example of IRS Restaurant that allows you to exchange your gift certificate for cash! Remember though, you'll receive the $8,000 from the IRS AFTER you purchase the home, so you cannot use the funds to help with your down payment.
# # #
Since 1880, Bell Mortgage has been a pioneer in the mortgage business in Minnesota. Bell enjoys a successful and enduring history that is unmatched by any of its competitors.