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First-Time Homebuyer Tax Credit Can Be Used as Down Payment for FHA-Insured Loan |
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| • HUD Secretary Shaun Donovan announced on May 29, 2009 that the FHA will allow homebuyers to apply the new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. |
| • The action permits the first-time homebuyer's anticipated tax credit to be applied toward the family's home purchase right away. |
| • State Housing Finance Agencies and certain non-profits can “monetize” up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. |
| • Homebuyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs. |
| • Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their down payments via secondary financing provided by the HFA or non-profit. |
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Background: |
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The first-time homebuyer credit provides a maximum available credit of $8,000 (for homes purchased in 2009) for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full credit is available for homes costing $75,000 or more. |
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Any home purchased as the taxpayer’s principal residence and located in the United States qualifies. You must buy the home before Dec. 1, 2009. For a home that you construct, the purchase date is considered to be the first date you occupy the home. |
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Taxpayers (including spouse, if married) who owned a principal residence at any time during the three years prior to the date of purchase are not eligible for the credit. Vacation homes and rental property do not qualify for this credit. |
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The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less. |
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References: |
| IRS.gov |
| HUD.gov |
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| First-Time Homebuyer Tax Credit - Frequently Asked Questions |
| February 2009; Source: Realtor.org |
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| Comparison chart from Realtor.org (PDF) |
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| How much is the tax credit? |
| The maximum credit amount is $8000 or 10% of the cost of the home. |
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| What type of property is eligible? |
| Any single family residence (including condos, co-ops, townhouses) that will be used as a primary residence. |
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| Is it a tax credit or tax deduction? |
| It is a tax credit. A credit reduces taxes owed after all standard deductions are calculated. |
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| Is there a limit depending on income? |
| Yes. The full amount of credit is available for individuals with adjusted gross income of no more than $75,000 ($150,000 for a joint return.) It phases out above those caps ($95,000 and $170,000). |
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| Who qualifies as a first-time buyer(s)? |
| Anyone who has not owned or purchased a primary residence in the last three years is considered a first-time buyer in this program. |
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| Can the buyer receive the credit if they're financed with state or local bonds? |
| Yes. |
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| Does the buyer have to repay the credit? |
| The buyer(s) must live in the home for at least three years. If less than three years, then the credit must be repaid. |
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| When does the tax credit program begin? |
| January 1, 2009. |
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| When does the tax credit program end? |
| December 1, 2009. |
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| How do homebuyers claim the tax credit? |
| Participants claim the tax credit on their federal tax return using IRS form 5405. Then the homebuyer would enter the $8000, or 10% of the home's cost, as a tax credit. This reduces any taxes owed or increases the refund to the homeowner. |