The Federal Government wants to send you a check for $8,000 to buy a home!

The housing market is the key to our economic recovery.  There are unprecedented reasons to buy a home including getting a tax credit of $8,000 for buying a home.

It is important that you consult your CPA about tax advice.

First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit.

The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.  If your spouse owns a home, you don't qualify but if you rent your primary home and own a vacation home, more than 50 miles from your primary you may qualify for first time home owner tax credit.  If as a parent you jointly buy a home with a child, you may be able to allocate the first time home owner's credit to your child.
 

The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

The first time home owner's tax credit phases out as modified adjusted gross income exceeds $75,000 for singles and $150,000 for joint

You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return.

Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and oddly enough houseboats.

Free Money

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

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