The IRS has updated the tax form used to claim the first-time homebuyer tax credit that’s been increased to as much as $8,000 for buyers purchasing a home this year before Dec. 1.
In 2008, nearly half of homebuyers were buying for the first time, and the expanded credit will make it easier for that group of buyers to enter the housing market this year, the Treasury Department said in an announcement publicizing its implementation.
IRS Form 5405 will allow qualifying buyers to claim the credit on either their 2008 or 2009 tax returns. The credit is equal to 10 percent of the purchase price of the home, up to a cap of $7,500 or $8,000.
For first-time homebuyers who purchased a home in 2008, the credit maxes out at $7,500, and functions like an interest-free loan — it must generally be repaid over a 15-year period.
The American Recovery and Reinvestment Act of 2009 raised the cap to $8,000 and eliminated the repayment requirement unless a home is resold within three years.
A first-time homebuyer is anyone who hasn’t owned a primary residence in the last three years, and only those who meet income limits qualify.
The credit begins phasing out for individuals with a modified adjusted gross income of more than $75,000, and for married couples earning more than $150,000 and filing jointly. Individuals making $95,000 or more and married couples earning $170,000 or more do not qualify for the credit.
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