The clock is ticking on tax day as April 18 (this year) quickly approaches. You may have already filed, but it’s never too soon to start planning for 2011 and taxes. This post is the second of a four part series on taxes and homeownership as you file your taxes for 2010 or plan for 2011.
Tax Credit for First Time Homebuyer Loans
Remember the Homebuyer’s Tax Credit? If you purchased a home for the first time in 2008, 2009 or before May 1, 2010, you may be eligible for a credit on your taxes. The Worker, Homeownership and Business Assistance Act of 2009, extended and expanded the parameters of the tax credit. Since November 2009, first time homebuyers and individuals who have lived in the same home for five consecutive years also qualify.
The credit can reduce your tax bill or increase your refund (depending on the tax you owe), as much as 10 percent of the purchase price of your principal residence. For first time homebuyers, the maximum credit it $8,000 and it’s $6,500 for repeat homebuyers.
Some important points to remember about the homebuyer’s tax credit:
- “First time” homebuyer is defined as someone who hasn’t owned a principal residence for three years before the purchase. This includes both partners for a married couple.
- The home must be used as a principal residence for three consecutive years after the purchase.
- Buying a home from parents, grandparents, or children does not qualify for the tax credit.
- You must have had a contract in place to purchase the home before May 1, 2010, and the deal must have closed by July 1, 2010.
- The repeat buyer’s credit only counts for homes purchased between November 2009 and May 1, 2010.
- You are required to furnish proof of the home purchase to the IRS, like a HUD-1 form
If you have questions about the homebuyer’s tax credit, the IRS has a fairly easy to understand resource page that includes how to admend a previous return if you neglected to take the credit for 2008 or 2009. It’s not a bad idea to seek the help of a tax professional. LeaderOne is here to answer any questions you have about Austin Home Loans.