The Federal Government has extended the first time home buyers tax credit which allows first time home buyers to receive an $8000.00 credit to assist them in purchasing their first home. Please let it be known that for purposes of this program the IRS has defined a first time homebuyer as anyone who has not owned real estate as a principal residence with in the previous three (3) years.
This program does not require any repayment of the credit provided that the purchaser uses the property as their primary residence for a period of thirty-six months after their date of purchase.
The credit program is quite simple, you are the buyer will receive a credit of up to ten percent (10%) of the purchase price or a maximum of $8000.00 as a credit on your 2010 return, provided that your new home has a final sale price of eight hundred thousand dollars or less. This program went into effect on January 1, 2010 and is available to qualified purchaser of their first new home provided that they have the property under agreement on or before April 30, 2010 as well they settle on the their new home prior to June 30, 2010 to be able to qualify for the credit.
Also to qualify the purchaser cannot have an income greater than $75,000.00 as non-married purchaser or $150,000.00 for married purchases that file a joint tax return.
To assist you in understanding how you will benefit from this program directly I would like to explain what a tax is as well as how it is applied. A credit is a dollar for dollar reduction in what you owe as a tax payer; this means that if you owe $8000.00 to the IRS and you qualify under this program you would receive a $8000.00 credit thus leaving you owing the IRS nothing.
To better explain a tax deduction is subtracted from the amount of income that is taxable, using the above example assume that you are in a 15% tax bracket and you owe $8000.00 in income taxes. If you the taxpayer received on an $8000.00 deduction rather than a credit, your tax liability would only be reduced $1200.00 or 15% of $8000.00, thus being lowered from the $8000.00 to $6,800.00.
The true benefit of the $8000.00 tax credit program for first time homebuyers is that the unused portion of the credit is refundable to the purchaser. This means that you as the first time homebuyer can claim their credit even if you have little or no federal income tax liability to offset. This typically involves the IRS giving you the homebuyer a refund check for a portion or even all of the $8000.00 credit. So it is very easy to see how this program can be beneficial to a first homebuyer.
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