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THE new law sweetens a provision known as the first-time-homebuyer credit. In essence, if you meet certain qualifications, you may be eligible for a tax credit of up to $8,000. You also have a choice of claiming the credit on your federal income tax return for 2008 or 2009.
A credit is typically more valuable than a deduction because it eliminates your taxes on a dollar-for-dollar basis -- and in this case, you may get it even if you don’t owe taxes. Talk to your CPA about the benefits.
Purchase date is a determining factor
Q: Who can claim the credit?
A: In general, the IRS says you may be eligible if you bought your main home, located in the US, after April 8, 2008, and before Dec. 1, 2009, and if you (and your spouse, if you’re married) haven’t owned any other main home during the three-year period ending on the date of purchase. That means you might be eligible even if you owned a home for many years before that period. However, there are numerous other qualifications.
Q: How much is the credit?
A: That depends on when you bought the home and other factors, such as your income and the home’s price.
If you bought during the 2008 period and qualify for the credit, the maximum credit is generally $7,500. But it’s only half that amount if you’re married and filing separately from your spouse. And even though it’s called a credit, it’s really an interest-free loan. You generally have to repay it over 15 years, without interest, in 15 equal installments, the IRS says. The rules are more generous if you buy a home during the 2009 period and meet all the qualifications. In that case, the maximum amount generally is $8,000, or half that amount if you’re married filing separately. More important, you don’t have to repay the credit at all unless that home "ceases to be your main home within the 36-month period beginning on the purchase date," the IRS says.
Income limits and defining as your primary residence
Q: How do the income limits work?
A: You may be eligible for the full amount of the credit if your adjusted gross income, with certain modifications, is $75,000 or less -- or $150,000 or less if married and filing jointly. However, the credit begins to be phased out if your income exceeds those amounts. You can’t claim the credit at all if your income is $95,000 or more, or $170,000 or more if married and filing jointly, the IRS says.
Q: I own more than one home. How do I figure out which is my main home? And does it have to be a house?
A: The IRS says your main home is "the one you live in most of the time." No, it doesn’t have to be a house. It can be "a house, houseboat, house trailer, cooperative apartment, condominium or other type of residence."
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