First time home buyers tax credit Again, the home ownership as well as Business Assistance Act of 2009 extended the first-time homebuyer tax credit up to an amount of $8,000. This specific part of the law is only applicable to first-time home buyers and they have to be buying a primary residence. Vacation homes are not eligible under this program. There is a program available for returning home buyers. This can be used up to $6,500. I'll discuss this later in this post. To qualify to be eligible, the first home must be bought after the 1st of January 2009 but prior to the 1st of May 2010. If a legally binding contract is signed by the 30th of April, 2010, then the homeowner has until June 30th, 2010 to complete the transaction. This new law, the Act has established the maximum income limit at $125,000 for a single individual and up to $225,000 for married persons who is filing jointly. First time home buyers can choose to purchase a new construction or a resale property in both cases, since either of them is eligible for tax credits. The date of purchase has been carefully outlined as the actual closing date. When the closing date is reached, the title to the property we buy any house will be transferred to the first-time homeowner. Beware of young buyers, as you might not be eligible for tax credits If your parents claim you as a dependent. I've mentioned first time home buyers numerous times in this paragraph which means that the buyer did not have an actual residence for the past 3 years preceding purchasing the property. Be cautious about this, because it is also applicable to your spouse. Both the spouse and you have to be able to meet the first-time home buyer requirement to qualify for this tax deduction. The IRS is monitoring this policy very closely, since in the past year, more than 500 people under the age of 18 were able to take the deduction, and one of them was just 4 years old. older. Naturally, they will aggressively pursue any violations. The method used to determine the amount of the tax credit is determined by using 10% of the cost of buying the house. If, for instance, you buy an apartment with a sale price of $70,000 , the tax credit you receive will be equivalent to $7,000 but not the entire value of $8,000. If the price of sale is $100,000, then you are eligible for the entire tax credit of $8,000 and nothing more. Although the examples above are simple, make certain to speak with your tax professional for specific information prior to making any final decision, as your particular situation may differ. Be aware that you are not able to claim the tax credit for a later planned purchase, and you need to have closed on and taken title to the property before the 30th of June, 2010 in order to be eligible. The tax credit is due at the close of the year , when you submit your income tax returns. In order to get a tax credit earlier you can alter your dependents that you declare to boost your take-home monthly earnings by the total amount of tax credits you'll receive. I strongly suggest to not alter your dependents without consulting with a tax professional to ensure that it's properly calculated. A mistake in the dependent status of your child could result in a huge unexpected tax bill at the end of the year. Another restriction to the purchase of a new home is that the house is not able to be purchased by family members or from any of your ancestors , such as grandparents or parents. This also applies to lineal descendents of yours like children and grandchildren. Here's a great bargain. As an example, suppose that you only owed $5,000 in your income tax bill for the year in question. In that scenario, what can you do to claim an income tax deduction of $8,000 when the tax you paid was only $5,000. You can do it easily, simply submit the deduction of $8,000 and you'll receive an immediate cash payment of your initial $5,000 and an additional tax refund to Uncle Sam for $3,000. How do you beat this, right? Tax Credit for Repeat Home Buyers Credit (Move Up) The Home Ownership as well as Business Assistance Act of 2009 provides an income tax credit that is $6,500 to returning home buyers (a repeated home purchaser is defined as an existing homeowner) buying a primary residence from the 6th of November 2009 to April 30 in 2010. The time frame may be extended to the 30th of June, 2010, if an agreement to sell is signed and ratified before April 30, 2010. The repeat home buyer can buy any kind of house to qualify for the tax credit of up to $6,500. A buyer who is a move-up qualifies as a long-time resident when he/she lived in and owned his house for a minimum of 5 out of the past 8 years prior to purchasing this new residence. If married they must both be able to meet the criteria above. It isn't required that the home you purchase be higher than the previous one and therefore, some buyers could be called move-down buyers versus move-up buyers. It is anticipated that the majority will be buyers who are moving up.