Pittsburgh and Peters Township First Time Home Buyers Tax Credit Details

 The First Time Home Buyers Tax Credit is a simple plan, but it brings many pages of paperwork, explanation, and rules. To help answer all the questions that can arrise from about the credit, I have chosen some of the top questions I hear, from Pittsburgh Home Buyers as well as, Peters Township Home Buyers:

Pittsburgh and Peters Township Home Buyers Tax Credit Top Questions

1. Are there restrictions on the type of home? What types of homes will qualify for the tax credit?

Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

It is important to note that you cannot purchase a home from your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse. Please consult with your tax advisor for more information. Also see IRS Form 5405.

2. I read that the tax credit is “refundable.” What does that mean?

 
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

3.What if I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?


Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.

4. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

5. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?

Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.

6. How do I claim the tax credit? Do I need to complete a form or application?

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.

Buying a Home in Pittsburgh Area

All the previous information is just the tip of the iceberg. As you can see, there are many items Peters Township home buyers need to understand about the $8,000 tax credit. You can get the best information form a knowledgeable Pittsburgh Realtor or Peters Township Real Estate Agent; however, make sure you consult your tax professional for the full run down on how the tax credit may affect your taxes or effect savings for you!

And as always, if you have any questions about Pittsburgh Real Estate, Peters Township Homes for sale, or would just like to browse the Pittsburgh Area Real Estate MLS Listings, feel free to contact me, Jim Dolanch, your Peters Township Realtor, anytime.

Until next time,

Jim