IRS Issues Guidance on First-Time Homebuyer Tax Credit

The IRS has released IR-2008-106, providing some guidance about how individuals who utilize the new $7500 first-time homebuyer tax credit will reflect the credit on their tax returns and receive the benefit from any refund.

The notice reinforces the fact that taxpayers will be required to repay the credit, starting with their tax return for 2010, which will be filed in 2011. The IRS is designing a new Form 5405 for those who utilize the credit.

Here are the Details courtesy of the NAR:

HOUSING AND ECONOMIC RECOVERY ACT OF 2008
First‐time Homebuyer Tax Credit

Amount of Credit?

Ten percent of cost of home, not to exceed $7500

Eligible Property?

Any single‐family residence (including condos, co‐ops) that will be used as a principal residence.
Refundable: Yes. Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year.

Income Limit?

Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000, respectively).

First‐time Homebuyer Only?

Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.

Recapture?

Yes. Portion (6.67 % of credit) to be repaid each year for 15 years. If home sold before 15 years, then remainder of credit recaptured on sale.Effective Date?

Purchases on or after April 9, 2008 and on or before July 1, 2009

Source: National Association of Realtors