3 Weeks Left : Get $8,000 Cashback With The Federal Homebuyer Tax Credit Program (Military Edition)
For certain members of the government, and qualified military personnel, the clock is ticking on the 2010 federal home buyer tax program. You must be under mutual contract for a home on or before April 30, 2011 to meet program deadlines.
That’s just 3 weeks from today.
Who Gets The Tax Credit?
For most Americans, the home buyer tax credit program expired in April 2010. However, when the stimulus program was drafted, Congress wanted to make sure that deployed employees of the government and military were given an equal chance to cash in.
Therefore, it was written that members of the uniformed services, members of the Foreign Service, and intelligence community employees who served at least 90 days of qualified, extended duty service outside of the United States between January 1, 2009 and April 30, 2010 would be granted a 12-month extension.
Spouses of persons meeting the above criteria are eligible as well.
How Much Tax Credit Can You Get?
The federal home buyer tax credit program grants first-time home buyers a one-time tax tax credit of up to $8,000, and “long-time” homeowners a federal tax credit of up to $6,500.
The maximum tax credit as authorized by Congress is for up to $8,000 for first-time home buyers and up to $6,500 for long-time homeowners, where “long-time homeowner” is defined as someone who has lived in the same “main home” for at least 5 of the last 8 years.
Note that not everyone will get the full $8,000/$6,500 tax credit, however.
Your Tax Credit Is Subject To An IRS “Haircut”
Although the tax credit program is widely thought to give everyone $8,000/$6,500 just for buying a home, that’s not the case. The tax credit has limitation.
First, the tax credit is capped at 10% of the home’s purchase price. A home that sells to a first-time home buyer for less than $80,000, therefore, wouldn’t get the full $8,000, but some smaller amount.
And second, if your household income is too high, you’ll actually get nothing.
Single-filers with income less than $125,000 will receive the maximum credit from the IRS; and so will joint-filers with income under $225,500. However, for households in which income exceeds those limits, the tax credit is subject to a haircut.
For households earning more than $125,000/$225,500, the tax credit reduces 5% for every additional $1,000 in claimed income, until the tax credit falls to $0.
- Single-filer earning $125,000 : 100% of the tax credit
- Single-filer earning $126,000 : 95% of the tax credit
- Single-filer earning $127,000 : 90% of the tax credit
- Single-filer earning $145,000 : 0% of the tax credit (i.e. no credit)
The math is the same for joint-filers:
- Joint-filers earning $225,500 : 100% of the tax credit
- Joint-filers earning $226,500 : 95% of the tax credit
- Joint-filers earning $227,500 : 90% of the tax credit
- Joint-filers earning $245,500 : 0% of the tax credit (i.e. no credit)
Beyond purchase price and income, there are additional disqualifiers of which to be aware.
Even If You Qualify For $8,000, Your Home May Not
Just because you meet the above requirements, though, doesn’t mean you’ll still be credit-eligible. Not all home purchases will qualify, specifically those with any of the following characteristics:
- Homes acquired from a mother, father, spouse, or child
- Homes acquired from an entity in which you’re a majority owner
- Homes acquired by gift or inheritance
- Homes for which the primary buyer is under 18 years of age
- Homes for which the purchase price exceed $800,000
- Homes intended to be used as a second/vacation, or investment home.
These 6 rules will disqualify just a small percentage of purchases.
Still Got Questions. The IRS Has Your Answers.
At this point, you should be able to determine your own eligibility, and the size of your federal tax credit. However, you may still have questions. Thankfully, the IRS built a Bizarre Scenario FAQ. It’s worth a look.
The FAQ includes scenarios for couples getting married, divorced and separated, and includes “flipping” and various “renting homeowner” scenarios.
You should also call you accountant. Tax law is complicated and specific to the individual. In Southern California, this list of San Diego accounting firms may be helpful.
How To Claim Your Tax Credit
The home buyer tax credit is a federal program. It doesn’t matter whether you’re buying in Maryland, Virginia, Dayton, Ohio or anywhere else — if you file U.S. taxes, and meet the eligibility requirements, you’re set.
All you have to do is file — you can even do it online. Just be sure to use your new home as your “main home” for at least the next 3 years. Otherwise, the IRS will reclaim your refund.
Or, if you’ve already filed your 2011 taxes, ask your accountant to file an amended return for you that includes your tax credit claim. You’ll get your credit as soon as the IRS and U.S. Treasury can process your return.
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