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First Time Home Buyer Tax Credit

The first time buyer tax credit is an attempt by the Federal Government to stimulate purchases of houses by offering incentives for people to do so. This tax-credit is great news for many buyers who can do with any financial help they can get. The scheme was due to end in July 2010 but it has now had an extension so that more people can benefit from this financial incentive. As well as the first time home buyer there is also rebate for some existing home owners.

Who Can Benefit from the First Time Home Buyer Tax Credit?

This home buying tax credit is available for people who meet certain conditions;

  • They have not owned a primary residence for at least the last three years; this three year period is defined as the date going back from when you sign to purchase your new home. By primary residence what is being referred to here is the place where you live most of the time. So if you own a home but haven't lived there for a long time then you might still qualify for the tax credit; you need to have not lived in the home for five consecutive years within the last eight years.
  • For a married couple to qualify for the first time home buyer tax credit neither should have owned a primary residence within the last three years.
  • You must have at least entered into a binding contract to purchase the house prior to April 30th 2010 and be living in it by September 30th 2010.
  • Military personnel serving abroad will have an extended period to apply for the credit.
  • Those earning more than $75,000 will not be eligible for this tax benefit (this was extended to $125,000 for those making purchases after November 2009). Anyone earning between $75,000 and $95,000 may be able to claim some credit. Couples who purchased prior to November 2009 are allowed to earn $150,000 (after this $225,000). If the price of the house is more than $800,000 then you will not be entitled to make a claim.

If you meet the above conditions then you should be able to make a claim for this home buyer tax incentive.

How Do You Claim for First Time Home Buyer Tax Credit?

In order for first time home buyers to claim this tax credit they will need to fill in and submit an IRS 5405 form. This will mean that you will be claiming the tax on your federal income tax return when you do it. You won’t need to have any pre-approval to get this tax credit and so long as you meet the requirements and fill in the forms correctly there should not be any problems with your application. Unfortunately it will not be possible to send in this form electronically; it all must be done the old fashioned way with paper.

Some Final Thoughts on the First Time Home Buyer Tax Credit

This $8000 home buyer tax credit initiative will likely help many people who are looking to purchase a new home. The credit is 10% of the value of your new house; although it has been capped at $8,000. You should also be aware that if you decide to sell your home within three years of getting the credit you will need to give the money back to the government. So far this scheme has been a success, and it will be interesting to see if the Federal government decides to extend it even further.