First-Time Homebuyer Tax Credits

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by Mark Vanderhoff
on Friday, May 08, 2009

What if someone gave you $10,000 in cash for buying house in 2009?

In effect, that is what the federal and North Carolina governments are doing with their First-Time Home Buyer tax credits this year. Buyers won't literally receive a pile of bills, but they will receive a very large refund check from Uncle Sam once they file their 2009 taxes.

That makes this year a once-in-a-lifetime opportunity for first-time home buyers. It's uncertain whether either credit will return next year, for two reasons. First of all, data are showing the first signs of improvement in the housing downturn and economic recession. Second, even though a full recovery isn't expected right away, the government has already spent enormous sums of stimulus money, and federal and state budgets already face massive strains from lost revenue.

So, get it while you can, first-time homebuyers. You've got until December 31st to close on a house!

First-Time Homebuyer Credit

The federal First-Time Homebuyer Credit was part of the American Recovery and Reinvestment Act of 2009. Unlike the $7,500 credit of 2008, this one doesn't have to be paid back. Buyers will receive a check for $8,000 (minus any taxes they owe) with their refund next year, after they file their 2009 taxes.

Who qualifies?

A buyer who has not owned a principal residence for the past three years. Married couples do not qualify if one spouse has owned a home in the three-year period prior to the home purchase.

How much can buyers receive?

Ten percent of the home's value, or a maximum of $8,000.

How do I claim the credit?

It's simple. Just file IRS Form 5405 with your 2009 tax return.

For more information, visit: http://www.federalhousingtaxcredit.com

Mortgage Credit Certificate

This credit is a little more complicated. It's been misleadingly labeled a state tax credit, when in fact it's a state-administered federal tax credit. Like the First-Time Homebuyer Credit, taxpayers receive a benefit when they file their taxes at the end of the year, but there's another facet to this program: borrowers can also use the MCC to lower their monthly tax withholdings on their W-4, allowing their lender to give them more favorable loan terms. Confused? Don't be - your mortgage specialist and tax accountant will know what to do.

Who qualifies?

First-time homebuyers who meet income and sales price requirements, which vary by county. In Buncombe County, for instance, a family of four can't have a household income of more than $64,000 (singles and couples can't have more than $56,000 in household income) and the purchase price of an existing home can't be more than $210,000.

How much can buyers receive?

Up to 20 percent of the mortgage interest, up to $2,000.

How do I claim the credit?

Two ways: 1) By changing your information on your W-4 (the IRS form you fill out whenever you get a wage-paid or salary-paid job), and 2) Including the credit on your 2009 federal tax return.

For more information, visit: http://www.nchfa.com/Homebuyers/HBwhatweoffer.aspx#mcc

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About the Author - Mark Vanderhoff

Contact Mark Vanderhoff:
Keller Williams Realty
828-335-3794
markv@kw.com
markv.yourkwagent.com

Learn more about Mark.