Friday, January 30, 2009

First Time Home Buyer Credit

One of the new tax provisions that are available to new homeowners in 2008 is the First Time Home Buyer Credit. The First Time Home Buyer Credit would provide a refundable tax credit that is equivalent to an interest-free loan equal to 10 percent of the purchase price of a home (up to $7,500)by first-time home buyers. Unlike other tax credits, the first-time home buyer credit must be repaid in equal installments over 15 years. Repayments start two years after the year in which the residence is purchased.

The credit can be applied to homes purchased on or after April 9, 2008, and before July 1, 2009.
The new credit phases out for married couples filing jointly with modified AGI between $150,000 and $170,000 and for single taxpayers with modified AGI between $75,000 and $95,000.

A person is considered a "first-time home buyer" if he or she (or spouse) had no ownership interest in a principal residence during the three-year period before the new home is purchased. Renters who own a vacation home may qualify for the credit since the three-year look back period for owning a home applies only to a principal residence.

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