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First-Time Home Buyer Tax Credit

The First-Time Homebuyer Tax credit is a program that was developed to encourage young people into buying homes. This law allows first-time homebuyers and other qualifying individuals to take a certain amount off their income taxes in the year they purchase a home. This credit is also available to long-term homeowners who are upgrading their residence.

The First-Time Homebuyer Tax credit was significantly expanded for the years 2008, 2009 and 2010. This expanded tax credit ended for civilians on 9/30/2010. However for members of the military serving outside of the US for at least 90 days (from 12/31/08-5/01/10) the deadline was extended to April 30, 2011 to enter into a contract to buy a home. The deadline to close on the purchase was extended until June 30, 2011. This credit is worth up to $8,000.00 dollars and can be taken off your income taxes. If your tax is less than that, you are still eligible to take the total credit amount.

This expanded home credit is also available for replacing properties for a credit up to $6,500.00 for anyone who is married ($3,250.00 for singles) if living in a house for any five-year consecutive period out of eight years.

The expanded credit also raises the income threshold for receiving the credit to $250,000 for married couples ($125,000 single) and raises the purchase amount to $800,000.00 to qualify for the credit.

In order to claim the credit, you must complete IRS Form 5404 and include the following documents:

  • A copy of the Settlement Statement or a retail contract if a mobile home
  • Certificate of Occupancy (for New Homes)

All documents must be signed and show the address of the home and purchase amount. If you are in the military and meet the 90 days of oversees service requirement, this is a great opportunity to get into a home. Interest rates are still at all time lows and with the military VA loan guarantee, a service member is one of the most eligible buyers in today’s real estate market.

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