A Guide to the First-Time Homebuyer’s Credit by Steve Chegwin, CPA

Please welcome Steve Chegwin a Santa Clarita Valley based CPA and the latest contributor to the West Ranch Beacon. Steve will be writing about tax issues that effect us all and bringing clarity to the complex topic of taxes. We hope you will enjoy his columns as well as learn something new!  The first-time homebuyer credit is a one-time refundable credit. The credit is available for first-time buyers that purchase a principal resident between January 1, 2009 and April 30, 2010. The refundable credit is the lesser of $8,000 or 10% of the purchase price.  The refundable credit is used to offset the taxpayer’s entire federal tax liability with any remaining credit refunded to the taxpayer. Another great benefit is that you can claim the credit on the prior year’s tax return. As example, if you buy a house in 2010, prior to May 1st, you can claim the credit on your 2009 return. If the purchase contract is in place before May 1, 2010 and you purchase the principal residence by July 1, 2010, it qualifies for the credit.

First-time home buyer is defined as not owning a principal residence during the three-year period ending on the date of the purchase of the principal residence to which the credit applies. You have to repay the credit if you sell or stop using the home as a primary residence within 36 months of the purchase date.

Effective November 11, 2009, an individual who has maintained the same principal residence for any 5 consecutive years during the eight-year period ending on the date of purchase of a subsequent residence is treated as a first time homebuyer. However, their credit is limited to $6,500 and the purchase price cannot exceed $800,000.

There was a tax credit for homes purchase in 2008. However, is was for a lesser amount and had to be repaid over 15 years. As of now, California law does not comply with the federal homebuyer’s credit.

There are many exceptions and income limitations that apply when computing the credit amount.  They’re too numerous to address in this article. For those that qualify this credit is a gift from Uncle Sam to help you buy your next home. Please contact me to see if you qualify for the credit or for any other tax questions you may have.

Steve Chegwin, CPA

Steve Chegwin is a Santa Clarita Valley based CPA and can be contacted at (661) 253-0270 or email at [email protected]. His commentaries represent his own opinions and not necessarily the views of any organization he may be affiliated with or those of the West Ranch Beacon