Owning a home has always been part of the American dream. Congress has consistently provided tax deductions and other benefits to homeowners, and 2010 was no exception.
For 2010, the First-Time Homebuyer Credit is available for buyers of homes under the following circumstances:
- You must have a contract in place by April 30, 2010.
- You must complete the purchase or close by September 30, 2010.
- If you are a first-time homebuyer, the credit can reach $8,000 ($4,000 if married filing separately) or if lower, 10% of the purchase price.
- Long-time residents can qualify for a credit up to $6,250 ($3,250 if married filing separately) or if lower, 10% of the purchase price.
- The home must be a principal residence.
- Income limitations and documentation rules apply.
For purchases made in 2010, you can choose to use the credit on your 2009 or 2010 return.
The credit does not apply if the purchase price is greater than $800,000, the home was purchased from a “related person,” another taxpayer can claim the purchaser as a dependent, or the home was acquired through gift or inheritance.
A first-time homebuyer is someone who has not owned a principal residence in the three years before the new home’s purchase date, and a long-time resident has owned and used the same home as the principal residence for any five-consecutive-year period during the eight years before the new home’s purchase date.
The credit, which is refundable, phases out at modified adjusted gross income (AGI) between $225,000 and $245,000 for married taxpayers filing jointly and $125,000 and $145,000 for all other taxpayers.
The credit can be fully claimed if modified AGI is equal to or less than the $225,000 and $125,000 thresholds and is not available when modified AGI is greater than the $245,000 and $145,000 thresholds.
In addition, the credit’s availability is expanded for any individual or spouse who serves on qualified official extended duty for at least 90 days during the period beginning after December 31, 2008 and ending before May 1, 2010. In this case, the deadline to purchase is April 30, 2011 and if by then the buyer enters a binding contract to close by June 30, 2011, he or she has until June 30, 2011 to finalize the purchase.
The credit only needs to be repaid if the home is sold within 36 months of the purchase date.
If you purchased your home in 2008 under the original first-time homebuyer’s rules, you generally must repay the credit over a 15-year period, which begins in 2010. The minimum payment is 1/15 of the original credit received. For homes purchased in 2009, you must repay the credit only if the home is no longer your principal residence within the 36-month period beginning on the purchase date.
The IRS has issued specific guidance on how to claim the credit for all years.
