TAX CREDIT FOR FIRST-TIME HOMEBUYERS EXPANDED

Credit Offers Up to $8,000 to Qualifying Taxpayers Now
In an ongoing effort to swiftly implement the Obama Administration's recovery plans, the U.S. Department of the Treasury last week announced the availability of an expanded tax break for first-time homebuyers – a provision under the American Recovery and Reinvestment Act of 2009 that will make up to $8,000 available now to qualifying taxpayers who buy homes this year.

First-time home buyers represent a significant portion of existing single-family home sales. In 2008, nearly one out of every two homebuyers were buying for the first time, and the expansion in the first-time homebuyer credit will make it easier for first-time home buyers to enter the housing market this year.

It is important to understand the definition of a first time homebuyer for purposes of this tax credit:
First time buyers are considered to be anyone who has not owned a principal residence for the prior three years.
The tax credit also has a provision for a phase out for those with adjusted gross incomes over $75,000, or $150,000 if filing jointly.
The Internal Revenue Service (IRS) has posted on IRS.gov a revised version of Form 5405, First-Time Homebuyer Credit to incorporate provisions from the American Recovery and Reinvestment Act. Under the new law, qualifying taxpayers who buy a home this year can claim up to $8,000, or $4,000 for married individuals filing separately, on either their 2008 or 2009 tax returns. The tax credit is only available for properties purchases between January 1, 2009 and December 1, 2009.

Unlike the prior first-time homebuyer credit, this is money individuals do not need to pay back as long as they retain in the property for at least three years.