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REPEAT HOME BUYER TAX CREDIT Kristin Carroll Powered By Docstoc
					                                 REPEAT HOME BUYER TAX CREDIT
                                From the Worker, Homeowner and Business Assistance Act of 2009

How much is the       10% of the cost of the home.
    credit?           Maximum amount is $6,500.

                   Basic requirements:
                     Home owner who has owned and lived in a home for at least five
                     consecutive years of the eight years prior to the purchase date.
    Who is           May not purchase from a family member who is an ancestor or lineal
   eligible?         descendent.
                   Income limits:
 (note increased
  income limits)      Those making no more than $125,000 (individual return) or $225,000
                      (joint return) may receive the full amount.
                      If more than $145,000 (indiv) / $245,000 (joint), buyer is ineligible.
                      Those between these two points can receive a partial payment.

                      Any single family residence.
                      Must be used as a principal residence replacing current residence.
 What type of
                      Transaction must close between November 6, 2009 and June 30, 2010.
property can be
                            If closed after April 30, 2010, binding contract for purchase must
  purchased?                be signed by April 30, 2010.
                      Price may not be over $800,000.

  How is the          Claimed as a part of the buyer’s federal tax return.
   payment                  Complete IRS Form 5405.
  received?                 Attach copy of HUD-1 Settlement Statement (received at closing).
  (note required            Not a reduction of your taxable income.
 documentation)             Reduces your tax liability. (See FAQ on the back for examples.)

Where can I get
                      IRS website:
                      Your tax advisor- or let me know if you need a referral for a tax advisor!

   Information courtesy of:

            Kristin Carroll
            Sente Mortgage

         901 S. Mopac, Building IV,
        Suite 125, Austin, TX 78746
                               First Time Home Buyer Tax Credit
                                  Frequently Asked Questions

1.   How is the partial tax credit determined?
     First, subtract either $125,000 (for an individual) or $225,000 (for joint filers) from the income of the
     borrower(s). Then divide the remaining amount by $20,000—the result should be a fraction. Subtract that
     fraction from 1. Then multiply the result times 10% of the cost of the home (maximum $6,500), and the
     result is the partial credit.
     For example: a couple who files jointly makes $235,000. The calculation would be:
         $235,000 - $225,000 = $10,000
         $ 10,000 / $20,000 = .5
         1 - .5 = .5
         .5 * $6,500 = $3,250
     They would be eligible for a $3,250 credit.
2.   Does the credit amount differ if you file jointly or separately.
     No. The credit is $6,500 for a qualified home purchase, whether the home buyer files taxes as a single or
     married taxpayer. However, if a household files their taxes as "married filing separately" (in effect, filing
     two returns), then the credit of $6,500 is claimed as a $3,250 credit on each of the two returns.
3.   What happens if I purchase a home with someone I’m not married to?
     IRS Notice 2009-12 provides guidance for allocating the homebuyer credit between taxpayers who are not
4.   How does a buyer apply for the credit?
     There is no authorization or approval required. Eligible purchasers will claim the credit by filing IRS Form
     5405 with their tax return. A copy of the HUD-1 Settlement Statement provided to buyers at closing must
     be attached to Form 5405.
5.   Can I use the credit as part of my down payment?
     The IRS permits you to reduce your withholding by filing a new W-4 with your employer or reducing your
     quarterly tax payments. The additional money in your paycheck can be saved for your down payment. IRS
     Publication 919 contains rules and guidelines for income tax withholding.
6.   What is the difference between a tax credit and a tax deduction?
     A tax deduction is subtracted from the amount of income that is taxed.
     A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who
     owes $6,500 in income taxes and who receives a $6,500 tax credit would owe nothing to the IRS.
7.   What does refundable mean?
     That means the credit can be claimed even if there is little or no tax liability. Here are some examples of
     how this would work:
        If you owed $6,500 in taxes, after the $6,500 credit you would owe nothing.
        If you owed $3,000 in taxes, after the $6,500 credit you would receive a refund of $3,500.
        If you showed a refund a $1,000, after the $6,500 credit you would receive a refund of $7,500.
8.   If I buy a home in 2010 can I claim the credit on my 2009 taxes?
     Yes. The law allows taxpayers to choose to claim qualified home purchases made in 2010 as if the purchase
     occurred on December 31, 2009. If the purchase is made before taxes are filed, you can just file the
     appropriate forms. If your taxes have already been filed, you can file an amended tax return. Check with
     your tax professional about the appropriate way to file for the credit.