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Fundranker Blog—First-Time Homebuyer Tax Credit

First-Time Homebuyer Tax Credit

The Housing and Economic Recovery Act of 2008 and the American Recovery and Reinvestment Act of 2009 both have provisions for a first-time homebuyer tax credit. For both of these tax credits, a first-time homebuyer is defined as a person who did not own any other main home during the three-year period ending on the date of purchase. So even if you have owned a home in the past, but not in the last three years, pay attention to these first-time homebuyer tax credits—they can be worth thousands of dollars to you.

The Housing and Economic Recovery Act of 2008 enacted a first-time homebuyer tax credit for homes purchased after April 8 in 2008, which essentially is an interest-free loan. It is a refundable tax credit (you get a tax refund for any amount of the credit that exceeds your tax liability) of 10% of the purchase price of the home up to $7,500, but it has to be repaid over a 15-year period starting in 2010. If you bought a home after April 8 in 2008, make sure you look at Form 5405 to see if you can claim this tax credit.

The American Recovery and Reinvestment Act of 2009, just signed into law by President Obama this month, goes a step farther. If you purchase a home in 2009 before December 1, you maybe able to claim 10% of its purchase price up to $8,000 as a refundable tax credit which does not have to be repaid at all as long as the home remains your main home for three years. If you are thinking of buying a home in 2009, this new tax credit is an excellent reason to get it done before December 1. You even can claim this new, refundable tax credit on your 2008 Form 5405, even though your new home was purchased in 2009. If you buy your home in 2009 after you have filed your 2008 income tax return, you can file an amended 2008 tax return to claim the credit or wait and claim it on your 2009 income tax return.

Posted 2/22/09 7:43pm ET in Tax Tips