FirstTime Homebuyer

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First-Time Homebuyer

• Federal Income Tax Credit

Heritage Realty
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First-Time Homebuyer Federal Income Tax Credit

• New limited-time federal tax credit for
  first-time homebuyers
• Purpose Provide an incentive for first-time
  homebuyers, which is defined as an individual who
  has not owned a home at any point during the past
  three years.
• Opportunity First-time homebuyers can take
  advantage of todays low interest rates and ample
  inventory of homes for sale AND save on their
  federal taxes.

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Highlights of the First-Time HomebuyerFederal
Income Tax Credit

• Amount of tax credit is 10 of the cost of the
  home, up to a maximum credit of 7,500.
• Example If a home costs 65,000, the allowable
  credit would be 6,500. If a home costs 120,000,
  then the allowable credit would be 7,500.
• Interest-free loan that enables consumers to
  receive a tax credit on a dollar-for-dollar basis
  on their personal income tax return.
• The homeowner begins paying the tax credit back
  in 2011 and makes equal installments for 15
  years.
• If the homeowner sells the home at any point
  during the 15-year payback period, then the
  remaining amount is recaptured, unless they sold
  the home at a loss at which point it is forgiven.

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Eligibility Requirements

• Must be a first-time homebuyer, defined as an
  individual who has not had an ownership interest
  in a principal residence in the previous three
  years.
• Certain income limits do apply.
• Amount of the credit is the same for all
  taxpayers, married or single.
• Principal residence must be purchased on or after
  April 9, 2008 and before July 1, 2009.

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Eligibility Income Requirements

• Individuals whose form 1040 filing status is
  single (or head of household) are eligible for
  the tax credit if their income is no more than
  75,000. Individuals who file a joint return may
  have no more than 150,000 in income.
• Individuals with incomes between 75,001 and
  94,999 (single) or 150,001 and 169,999 (joint
  return) are eligible for a partial tax credit.
• Example A couple had an income 165,000
• Excess income 165,000 - 150,000 15,000
• The 15,000 excess income is divided by 20,000
  as stipulated in the law
• This results in a 75 reduction of the credit or
  a credit amount of 1,875.
• Individuals with incomes greater than 95,000
  (single) or 170,000 (joint return) are not
  eligible for this tax credit.

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Eligibility Principal Residence

• A principal residence is defined as the home
  where an individual spends most of his/her time.
• Generally defined as 50 of time and it applies
  to condos, co-ops, townhouses or detached single
  family dwellings.
• If a borrower has owned an investment property or
  second home, but not a primary residence, the
  homebuyer is eligible.

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Eligibility Mortgage Restrictions

• The property must be located in the United
  States.
• If the financing is obtained by means of a
  mortgage revenue bond (through a tax exempt
  bond-related financing program offered by a state
  housing agency example PHFA), then the
  purchaser is NOT eligible for the credit.

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How the Tax Credit is Claimed

• Maximum of 7,500 credit claimed on ones
  individual or joint tax return for the
  single-family home purchase.
• Example 1 If an individuals actual tax
  liability was 5,000, then after the tax credit
  is applied the purchaser would receive a total
  refund of 2,500. The refundable amount is the
  difference between the 7,500 credit and the
  amount of ones tax liability.
• Example 2 e.g., If an individuals actual tax
  refund was 2,000, then after the tax credit is
  applied the purchaser would receive a total
  refund of 9,500.

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How the Tax Credit is Repaid

• Must be repaid without interest in equal
  installments of 6.67 of the total credit each
  year for 15 years beginning the year after the
  tax credit is claimed.
• Example If a homebuyer claims the 7,500
  credit in 2009, then the annual repayment will be
  about 500 a year beginning with his or her 2010
  tax return, filed in 2011.
• (15 years x 500 7,500)

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Additional Credit Facts

• No application required. The first-time homebuyer
  will simply provide details of the home purchase
  as part of 2008 or 2009 tax return. Seek advice
  from a professional tax advisor for specific tax
  calculations.
• There is no vehicle to obtain the funds before
  the home purchase.
• If the first-time homebuyer lives in the District
  of Columbia, he/she must choose between the DC
  Homebuyer Tax Credit and the Federal Credit.
  Using both is not an option.

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Additional Credit Facts (contd)

• A qualified home buyer can purchase a home in
  2009 and apply for the tax credit on his/her 2008
  tax return.
• A homebuyer who believes they will qualify for
  the tax credit is permitted to reduce their
  income tax withholding on their W-4 via their
  employer thus receiving the tax credit early.
  Advice from an accountant is recommended.
• A homeowner non-occupant co-borrower may co-sign
  on an application with a first time homebuyer.
  The first time homebuyer may qualify for ½ of the
  tax credit.

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Helping Others

• Do you know anyone else who may be thinking of
  buying and may be eligible to take advantage of
  this tax credit?
• Do you know anyone who may be providing financial
  assistance to a first-time homebuyer, perhaps
  their parents, grandparents, aunts or uncles, and
  would welcome being informed of this first-time
  homebuyer benefit?

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Additional Helpful Links Availableon our
National Brand Web Site

• Quick Facts
• (Source National Association of Realtors)
• Frequently Asked Questions (Source National
  Association of Realtors)

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Summary

• A first time homeowner who purchases a home
  between April 9, 2008 and July 1, 2009 is
  eligible for up to a 7,500 tax credit.
• This tax credit will be paid back as an
  interest-free loan over 15 years.
• The first time Homeowner will not begin to pay
  back the interest-free loan until 2011, when the
  homeowner files his/her 2010 tax return.
• At 7,500, the payment would be 500 each year.
• If the homeowner sells the home at any point
  during the 15-year payback period, then the
  remaining amount is recaptured, unless they sold
  the home at a loss at which point it is forgiven.