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Homebuyer Tax Credit Questions Answered

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By : Paul Escobedo    99 or more times read
Taxpayers who purchased a home in 2009 may qualify for a federal tax credit up to $8,000 that they can claim on either their 2009 federal tax return or 2010 tax return.

The tax credit criterion is different for first-time homebuyers and existing homeowners purchasing a new home. There are max income and sales price limits. The home must be purchased with the intent on using the home as a primary residence, vacation and rental properties do not qualify. If you intend to spend hours deciphering all the rules for the tax credit do's and don'ts you can retrieve most of them at the internal Revenue Service's site at, or you can take a few minutes to read this and get some questions answered.

The original purpose of the first tax credit passed by Congress in 2008 was to make an effort to revitalize the struggling housing sector and in doing so, fight the recession. The tax credit has made a difference in the number of homes purchased across the nation; therefore, the impact is there. The tax credit is expected to help as many as 4.4 million households before the expiration of the program.

To date, there have been three versions of the tax credit enacted and signed into law by Congress. Each iteration with significant changes and advantages to the previous versions. The first version wasn't a true tax credit; instead it was a long term, interest-free loan that had to be paid back within a 15 year period. The second version was made an actual credit, meaning that it didn't have to be repaid, and the credit amount available was increased by $500 to a max of $8,000. The third and current iteration of the homebuyer tax credit was extended and expanded to include not only first-time homebuyers, but existing homeowners as well.

Here are a few frequently asked questions answered:

  • If I purchase the property for the use of a business, am I eligible to claim the credit?
  • If I am a U.S. citizen and I purchase a property overseas, am I eligible for the credit?

The answer to both of these questions is NO. The property must be purchased in the United States as a primary residence.

  • Do I have to wait until I file my 2010 federal tax returns to claim the credit?
  • How do I claim the credit?

You can file the tax credit on your 2009 federal return with the 5405 form obtained on the Internal Revenue Service's site.

If you decide to sell the home within a three year period of the purchase date or you decide to use the property as a rental or vacation home, you will be required to pay back the credit.
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