Stop losing sleep over your tax situation. I'm Darrin Mish — a tax attorney in Tampa who's spent 32 years handling exactly this kind of problem. Here's what you need to know.
Under the American Recovery and Reinvestment Act 2009, taxpayers can claim up to $8,000 in tax credits for buying a house for the first time under certain conditions. If you have not owned a home within 3 years prior to your purchase now, you are entitled to claim 10% of the purchase price of your home up to $8,000. This benefit was due to expire at the end of this month but has now been extended by Congress recently with other key changes. Click here to watch or read more information on IRS Back Taxes.
Under the new, redrafted ARRA, the deadline is extended until April 30, 2010 and now includes purchases by existing homeowners who are replacing their primary residences. Both classes of buyers must sign contracts to buy homes between Nov 6, 2009 and Apr 30, 2010 and must close escrow by June 30, 2010. In addition to the original benefit of 10% of purchase price or $8,000 maximum tax break for first time homeowners, existing homeowners will get a tax credit of 10% of purchase price or $6,000 whichever is lower. They must have been living in their existing homes for at least 5 continuous years out of the last 8 years prior to buying their new homes.
Buyers who are unmarried will have to earn an adjusted annual income of up to $125,000 to qualify for the full tax credit. The amount of credit decreases according to a scale until your income reaches $145,000. As for married taxpayers, they qualify for the tax break if their joint incomes come up to $225,000 or less, if they are filing joint returns, until the highest income of $245,000 jointly.
Purchasing most types of homes qualify for this benefit, including houses, townhouses, condominiums and co-ops with the proviso that the purchase price does not exceed $800,000. Even if you buy a manufactured home with land, whether you own the land or not, you qualify for this tax credit. In such cases, both the price of the home and the land are taken into account in calculating the tax credit.
If you sell your home within 3 years of purchasing it, you will have to refund the IRS the tax credit out of the proceeds of your sale. If you do not sell within 3 years, you do not have to refund it.
The tax credit is given whether or not you owe any back taxes. If you do, the credit will be offset from your tax debts and if you do not, you will receive a refund check for the full tax credit amount.
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