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$8,000 Federal Tax Credit for First Time Home Buyers.
The American Recovery and Reinvestment Act of 2009 signed into law by President Obama provides "First Time Home Buyers" with an $8,000 Tax Credit. To qualify for the credit, the individual must: (1) purchase a new home, condominium, or town house that will be used as the individual's primary residence; (2) not have owned, or co-owned, a home within the past three years; (3) have an adjusted gross income less than $75,000 if single, and $150,000 if married; and (4) file IRS Form 5405. The tax credit is NOT available to non-resident aliens, or to individuals who purchase their home from a close relative.
The tax credit, is not a deduction, but an actual credit against your tax liability. In addition, the tax credit is refundable, which means that the individual will be entitled to a refund on if the tax credit exceeds the amount owed to the IRS. The tax credit does NOT have to be repaid so long as: (1) the home is purchased between January 1, 2009 and November 30, 2009; and (2) the individual resides in the home for at least three (3) years.
However, don't think you can just go out and buy a property and flip it, or rent it out. If you sell the home within the three year time frame, or fail to use it as your primary residence (e.g. rent it out), then you will be required to repay the tax credit.
To claim the tax credit, the first time home buyer must file IRS Form 5405 with their annual 1040 income tax return. The form is extremely easy to complete. All you need to do is the following:
$10,000 California State Tax Credit for ANY Qualified Buyer of New Single Family Residence
This tax credit is available for "qualified" buyers who on or after March 1, 2009, and before March 1, 2010, purchase a single family residence that has never been occupied. Although the buyer need not be must reside in the new home for a minimum of two years immediately following the purchase date (close of escrow).
The state tax credit offers individuals who purchase a "new home" up to $3,333 off state taxes for each of the first three years after buying the home.
To qualify for the tax credit, the individual must: (1) purchase a single family residence that has never been occupied between March 1, 2009 and March 1, 2010; (2) occupy the new residence as his or her primary residence for at least two years; and (3) within one week after the close of escrow, the seller must complete Part I or Form 3528-A - Application for New Home Credit and the buyer must complete Parts II and III of Form 3528-A and fax the complemented application for the credit to 916.845.9754. You must send the completed signed form by facsimile; no other means of transmission will be accepted.
To qualify for the state tax credit, you do NOT have to be a first time home buyer, and there is no income limit. Unfortunately, the state tax credit only applies to the purchase of a "newly built" and "never occupied" single family residence.
© 2009 Melissa C. Marsh. All Rights Reserved.
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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.