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First Time Home Buyer Tax Credit Extension

First Time Home Buyer Tax Credit Extension

First Time Home Buyer Tax Credit Extension: What You Need To Know

Buying a home is a life-changing experience. It’s a significant investment and a great financial responsibility. But purchasing a house for the first time can be intimidating, and many potential first-time homebuyers struggle to gather the money they need for a down payment. Fortunately, there are several incentives provided by the government to help first-time homebuyers make this investment. The First Time Home Buyer Tax Credit is a great incentive that provides a tax credit of up to $8,000 to eligible first-time homebuyers.

In 2008, the government passed the Housing and Economic Recovery Act of 2008, which included the First Time Home Buyer Tax Credit. The incentive was designed to stimulate the economy by encouraging consumers to purchase homes. Since its inception, the tax credit has helped millions of Americans achieve the American dream of homeownership.

What is the First Time Home Buyer Tax Credit?

The First Time Home Buyer Tax Credit is a tax credit provided by the government to encourage eligible first-time homebuyers to purchase a home. The tax credit is a dollar-for-dollar reduction of the homebuyer’s federal income tax liability. The credit is worth up to $8,000 and can be claimed on a taxpayer’s income tax return.

Who is Eligible for the First Time Home Buyer Tax Credit?

To qualify for the First Time Home Buyer Tax Credit, you must meet the following criteria:

– You must be a first-time homebuyer. This means that you or your spouse cannot have owned a home in the three years preceding the purchase of your new home.
– You must purchase a home between April 8, 2008, and December 31, 2021. The home must be your primary residence.
– You must meet certain income requirements. The credit is available to taxpayers with a modified adjusted gross income (MAGI) of less than $125,000 for individuals and $225,000 for married couples filing jointly. The credit phases out for taxpayers with incomes above these limits.

For those who qualify for the tax credit, it can be claimed on your federal income tax return using Form 5405, which is available on the IRS website.

First Time Home Buyer Tax Credit Extension

The First Time Home Buyer Tax Credit was originally set to expire on November 30, 2009. However, the government extended the deadline to purchase a home to April 30, 2010, and allowed homebuyers an additional 60 days to close on their home. This extension was meant to provide more time for buyers to take advantage of the tax credit.

In 2010, the government extended the tax credit again. This time the deadline was extended to September 30, 2010. The extension was intended to make sure that homebuyers who had already begun the process of purchasing a home could still benefit from the tax credit.

The First Time Home Buyer Tax Credit was further extended in 2017. The Tax Cuts and Jobs Act (TCJA) of 2017 did not renew the credit but provided a grandfathering provision for certain homebuyers. Homebuyers who entered into a written, binding contract to purchase a home on or before April 30, 2010, and closed on the home by June 30, 2010, are still eligible for the credit.

How the First Time Home Buyer Tax Credit Works

The First Time Home Buyer Tax Credit works by reducing the amount of federal income tax you owe. The credit is worth up to $8,000 or 10% of the purchase price of the home, whichever is less. For example, if you purchase a home for $75,000, your tax credit would be $7,500.

If you are eligible for the credit, you will need to complete Form 5405 and attach it to your federal income tax return. The credit will then be applied to your tax liability. If the credit exceeds your tax liability, the excess will be issued as a refund.

The tax credit is non-refundable. This means that the credit can only reduce your tax liability to zero. You cannot receive a refund for any unused portion of the credit.

Additional First Time Home Buyer Incentives

In addition to the First Time Home Buyer Tax Credit, there are several other incentives provided by the government to encourage first-time homebuyers to purchase a home. These incentives include:

1. Mortgage Interest Deduction: Homeowners who itemize their tax deductions can deduct the mortgage interest paid on their primary residence from their taxable income. This deduction can result in significant tax savings for homeowners.

2. Property Tax Deduction: Homeowners can also deduct the property taxes paid on their primary residence from their taxable income. This deduction can also result in significant tax savings.

3. Mortgage Credit Certificates: First-time homebuyers in certain states can qualify for a Mortgage Credit Certificate (MCC). An MCC allows homebuyers to claim a tax credit for a portion of their mortgage interest paid on their primary residence.

Conclusion

The First Time Home Buyer Tax Credit has been a popular incentive for eligible first-time homebuyers since its introduction in 2008. The credit provides a tax credit of up to $8,000 to eligible homebuyers and has helped millions of Americans achieve the American dream of homeownership. While the credit has been extended several times since its introduction, it is set to expire on December 31, 2021. If you’re a first-time homebuyer, make sure to take advantage of this incentive while it lasts.


What is the First Time Home Buyer Tax Credit Extension?

An individual may be able to obtain the first-time homebuyer tax credit if they are regarded as an eligible buyer who has purchased a home as their primary residence in the taxable years of 2008, 2009 or 2010. The eligibility requirements will vary depending on the year of the purchase. Moreover, there are specific benefits attached to the military members or federal employees.

The First Time Home Buyer Tax Credit will reduce the buyer’s tax bill—or increase their refund—depending on the taxes the individual owes. The Internal Revenue Service will refund the credit, even if they own no tax or
the credit is more than the taxes owed. Legislation was officially enacted in July of 2010 formally extending the closing deadline from June 30th to September 30th for all eligible home purchasers. Furthermore,
legislative alterations that took place in November of 2009 extended the First Time Home Buyer Tax Credit and added documentation requirements for securing the credit.

The American Recovery and Reinvestment Act of 2009 officially enacted the First Time Home Buyer Tax Credit Extension by increasing the credit figure to $8,000 for purchases made in 2009 before the first of December. Additionally, the Worker, Homeownership and Business Assistance Act of 2009 extended the deadline—any taxpayer who purchased a home before May 1st of 2010 is eligible for the First Time Home Buyer Tax Credit Extension—the buyer must have officially closed on the home before September 30th of 2010.