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Homeowner Down Payment * $7500 First Time Homeowner Tax Credit   

Those who bought a main home recently or are considering buying one may qualify for the first-time homebuyer credit.

Normally, a taxpayer qualifies if she didn’t own a main home during the prior three years. This unique credit of up to $7,500 works much like a 15-year interest-free loan. It is available for a limited time only –– on homes bought from April 9, 2008, to June 30, 2009. It can be claimed on new Form 5405 and is repaid each year as an additional tax. Income limits and other special rules apply.

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The $7500 tax credit is available for first-time homebuyers only. The law defines a first-time homebuyer as a buyer who has not owned a home during the past 3 years. All US citizens who file taxes are eligible to participate in the program. First - time home buyers would receive a $7500 tax credit for the purchase of any home on or after April 9, 2008 and before July 1, 2009. To qualify the home buyer must actually close on the sale of the home during this period.

This credit is a refundable credit meaning that if you pay less than $7500 in federal income taxes, then the government will write you a check for the difference. For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $2,500 payment from the government. If you are due to receive a $1,000 tax refund from the government, your refund would grow to $8,500 ($1,000 plus $7,500 from the homebuyer tax credit). Buyers can take the tax credit on their 2008 or 2009 tax return. If you purchased the home in 2008, the tax credit is taken on your 2008 tax return. If you buy in 2009, you have the option of taking the credit on your 2008 or 2009 tax return. All homes, whether single-family, town homes or condominium apartments will qualify, provided the home will be used as a principal residence and the buyer has not owned a home in the prior three years. This also includes newly constructed homes.

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The tax credit essentially serves as an interest free loan to be paid back over 15 years. For example, a home buyer claiming a $7,500 credit would repay the credit at $502.00 per year. However, the buyer does not have to start re-paying the credit until two years after the tax year in which the credit is claimed. If the homeowner sold the home, then the remaining credit would be due from the profit of the sale of the home. If there was insufficient profit, then the remaining credit payback would be forgiven.

Home buyers who file as single or head-of-household taxpayers can claim the full $7,500 credit if their modified adjusted gross income (MAGI) is less than $75,000. Between $75,000 and $95,000 they are eligible for a partial tax credit. Married couples who earn between $150,000 and $170,000 are eligible to receive a partial tax credit. The credit is not available for single taxpayers whose MAGI is greater than $95,000 and married couples with a MAGI that exceeds $170,000


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