Here's an example: Imagine you owe $1000 in tax and you're entitled to $8,000 from the First Time Homebuyer Credit. After filing out the required form and submitting the valid paperwork (we'll discuss that in a separate post), you would receive a check for $7,000 from the IRS.
It's really a great way to reduce your tax bill.
Here are the quick facts on the First Time Homebuyers Tax Credit:
What is it?
The First Time Homebuyers Credit allows a dollar-for-dollar credit on your tax. For first time homebuyers, the credit is the lesser of $8,000 ($4,000 if married, filing separately) or 10% of the purchase price. For long time homeowners, the credit is for $6,500 ($3,250 if married, filing separately) or $10% of the purchase price.
Who is entitled?
A "first time homebuyer" who purchased a home in the US between December 31, 2008 and May 1, 2010. You are a "first time homebuyer" if you (or your spouse) did not own any other main home in the 3 years prior to the date you purchased the new home.
A "long time resident" who owned the same home for 5 out of the 8 preceding years, prior to purchasing the new home. The new home has to have been purchased between November 6, 2009 and May 1, 2010.
If you entered into a binding contract to buy a home during that time but did not yet purchase the home, you can still take the credit if you complete the purchase by July 1, 2010.
Who is not entitled (non-exhaustive list):
Your purchase price was over $800,000;
Your Modified Gross Income is $95,000 if home was purchased before November 6, 2009 or $145,000 ($245,000 married filing jointly) if home was purchased after November 6, 2009;
You are a dependent on someone else's return that year;
You sell the home within one year of purchase date; and