First time home buyers tax credit The Home ownership as well as Business Assistance Act of 2009 was extended to the first-time homebuyer tax credit, which is capped at an maximum of $8,000. This particular section of the act applies only for first time home buyers, and they must be purchasing a principal residence. Vacation homes will not be included in this program. There is also a program for homeowners who have purchased multiple homes, which can be used up to a maximum of $6,500. I'll go into more detail later in this post. To qualify, the first time home has to be bought following January 1, 2009 but before the first of May 2010. If a binding agreement is signed by June 30, 2010,, then the homeowner has until June 30, 2010 to close the transaction. In this new scheme, the Act has made the maximum income threshold at $125,000 for a single individual and $225,000 for a married person if they are filing a joint tax return. The first-time homebuyer can choose to purchase a new construction or a resale property and both of these will be eligible for tax credits. The date of purchase is carefully we buy any house outlined as the actual closing date. At closing, the title of the property will transfer to the first-time home buyer. Attention young people, because you might not be eligible for the tax credit If your parents claim you as dependent. I've made reference to a first time home buyers numerous times in this paragraph this paragraph, which means the buyer hasn't owned an actual residence for the past three months prior to purchasing this property. Be cautious about this, since it applies to your spouse. Both yourself and the other spouse need to meet the first time home buyer criteria to be eligible for an income tax benefit. The IRS is monitoring this policy very closely, since last year more than 500 minors were able to take the deduction, and one of them was just 4 years old. old. Naturally, they will aggressively pursue any violations. The method used to determine the amount of the tax credit is determined by applying 10% of the purchase price of the home. If, for instance, you buy an apartment with a sale price of $70,000 then the tax credit you receive will be equivalent to $7,000 and not the entire amount of $8,000. If the selling price is $100,000, you will be eligible for the entire tax credit of $8,000 and nothing more. Even though the above examples are very simple, be sure to consult you tax advisor for specific details prior to making any final decision, as your particular situations may differ. Be aware that you can't claim the tax credit for a future purchased property, but you must be able to close and take ownership of the property by June 30, 2010 in order to qualify. The tax credit is due at the end of the year , when you complete your tax return. In order to get a tax credit earlier you may change your dependents that you declare to boost your take-home monthly earnings by the total amount of the tax credit you'll be receiving. I strongly recommend that you do not change the number of dependents you claim without first consulting with a tax professional to ensure that it's properly calculated. A mistake in the dependent status of your child could result in a significant tax bill at years end. An additional restriction in the purchase of a new home is that the property cannot be bought from relatives, or from any of your ancestors , such as parents or grandparents. This also applies to lineal descendents of yours such as children and grandchildren. This is a good bargain. As an example, suppose that you only owe $5,000 on your tax on income for the year in question. So in that case how do you claim an exemption of $8,000 in tax when you only paid $5,000. You can do it easily, simply make the deduction for $8,000 and you will actually get the cash amount of your original $5,000 , plus an additional tax refund of Uncle Sam for $3,000. How do you beat this, surely? Tax Repetition Home Buyer Credit (Move Up) The Home ownership as well as Business Assistance Act of 2009 has provide an income tax credit that is $6,000 for repeat home buyers (a returning homebuyer is defined as an existing homeowner) who purchase a primary residence between through November 6 to April 30 the year 2010. The time frame may be extended to May 30, 2010 if the contract of sale is signed and ratified before April 30, 2010. Repeat home buyers can purchase any type of home in order to take advantage of the lower tax credit of up to $6,500. A move-up buyer is defined as a long-time-resident when he/she has owned and resided in his house for a minimum of the last 5 of the past 8 years prior to purchasing this new home. If married and their spouses, both have to meet the qualification as above. It's not required that the new residence be higher than the previous one, therefore some buyers may be considered to be move-down buyers vice move-up buyers. It is expected that most will be move-up buyers.