It’s important to remember that the tax credit is just that… a tax credit. The
benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability
that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer were to owe $8,000
in income taxes and would qualify for a tax credit of $8,000, he/she would owe nothing. Better still, the tax credit
is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For
example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, he/she can
still receive a check for the remaining $4,000! |
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Higher Income Caps The amount of income someone can earn and qualify for the full amount
of the credit has been increased. Single tax filers who earn up to $125,000 are eligible for the total credit amount.
Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are
ineligible Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more
than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible. Maximum Purchase Price Qualifying buyers may purchase a property with a maximum sale price of $800,000.
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Some Restrictions to Taking the FTHB Credit According to the IRS, if any of the following describe a homebuyer’s
situation, a credit would not be due:
· They buy the home from a close relative. This includes a spouse,
parent, grandparent, child or grandchild. (Please NOTE below for details regarding purchases from "step-relatives.")
· They do not use the home as their principal residence.
· They
sell their home before the end of the year.
·
They are a nonresident alien.
· They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This
does not apply for a home purchased in 2009.)
·
Their home financing comes from tax-exempt mortgage
revenue bonds. (This does not apply for a home purchased in 2009.)
· They owned a principal
residence at any time during the three years prior to the date of purchase of their new home. For example, if the Homebuyer
bought a home on July 1, 2008, the Homebuyer cannot take the credit for that home if they owned, or had an ownership interest
in, another principal residence at any time from July 2, 2005, through July 1, 2008. NOTE:
If a Homebuyer purchases a home from a Step-Relative (not a direct blood relative) they would be eligible for the credit.
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Non-Occupant Co-Borrowers (parents) If a Parent (who will not live in the property) cosigns for a Mortgage,
the child is eligible for the Tax Credit, provided the child meets all other requirements
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