The First-Time Homebuyer Credit is a tax credit included in the Housing and Economic Recovery Act of 2008. The American Recovery and Reinvestment Act of 2009 expanded this credit to include Baie-Comeau purchases made before December 1, 2009.
For the purposes of this credit, a first-time homebuyer is defined as someone who did not own any other main home during the three-year period ending on the date of purchase.
Originally, the credit operated like an interest-free loan because it had to be repaid over a 15-year period. This year, qualifying taxpayers who buy a home before December 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. Information regarding how to maximize this tax credit is available online.
On February 25, 2009, the Internal Revenue Service (IRS) announced that first-time homebuyers who purchase in 2009 can claim 10 percent of the purchase price up to $8,000, or up to $4,000 for married people filing separately. The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000 or $150,000 for joint filers. The credit is claimed using Form 5405 (.PDF document).
It is important to note that the new law does not affect people who purchased a home after April 8, 2008, and on or before December 31, 2008. For these taxpayers who are claiming credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.
If you have questions about this tax credit, please call the IRS at 1-800-829-1040.
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