CT Mortgage Blog

The $8,000 First-Time Home Buyer Tax Credit will expire on December 1, 2009.

If you're planning to claim use the credit and haven't started looking for a home, your clock is officially ticking.  You must be closed on your new home on or before December 1.

Our typical turn time on a closing is 30-45 days, so, your $8,000 is in jeopardy unless you go under contract by mid October. 

The First-Time Home Buyer Tax Credit is part of the American Recovery and Reinvestment Act of 2009. Congress authorized a first-time homebuyer tax credit of up to $8,000 for home buyers meeting certain qualifying criteria.  The plan was to stimulate home purchases and, by most measures, the plan has been successful.

Typically, for tax purposes, a first-time home buyer is anyone who has not owned a "Main Home" in the last 3 years. The term "Main Home" is defined as a home in which a person has lived "for most of the time". 

For couples - both home buyers must be first-timers to be tax credit-eligible.

Moreover, not every first-time home buyer is eligible for the $8,000 First Time Home Buyer Tax Credit.  Some notable exclusionary cases include first-time home buyers who:

• File taxes separately and whose adjusted gross income exceeds $95,000
• File taxes jointly and whose adjusted gross income exeeeds $170,000
• Acquire property from a mother, father, sibling or child
• Acquire property from an entity in which they're a majority owner
• Acquire the home by gift or inheritance

The tax credit is limited to 10 percent of the home's purchase price the it also diminishes as home buyer income rises.  Tax credit phase-outs start at $75,000 for homebuyers filing separately and $150,000 on joint returns.

Assuming you qualify -

1. Buy and close on a new, "main" home before December 1, 2009.
2. Submit IRS Form 5405 with your 2009 tax returns in April 2010.

That's pretty much it.

There is a bit more to it, so make sure to speak with a tax consultant for all the details on the credit.