The $8,000 First Time Home Buyer Tax Credit.

Buying a home got more rewarding with the new $8,000 income tax credit for first time home buyers. As part of President Obama's stimulus package an $8,000 tax credit is available to any first time home buyer. This tax credit has been well publicized, however a lot of the details of the credit are typically left out when it is promoted.

The $8,000 tax credit is a credit not a deduction. That means the credit will apply directly to your taxes owed. If you owe $9,000 in taxes and you qualify for the full credit you now owe only $1,000 in taxes. If you do not owe any taxes how ever much of the new home owner tax credit you qualify for will be added to your return.

Although everyone refers to it as "the $8,000 tax credit" it is really a credit equal to 10% of the purchase price of the home. You only get the full $8,000 if the home you purchase costs over $80,000. If the home you purchase is less than $80,000 your credit will be 10% of that price.

In order to qualify for the First Time Homebuyer Tax Credit you must be a "first time home buyer". That means you have not owned a principal residence in the past three years. There are also income requirements. If your modified adjusted gross income is in excess of $95,000 ($170,000 filing jointly) you are not eligible for the credit. If your income falls between $75,000 and $95,000 ($150,00 to 170,000 filing jointly) you qualify for a partial tax credit. The full credit is available to anyone with a modified adjusted gross income level under $75,000 ($150,000 filing jointly).

There are some other restriction as well. Your new home cannot have been acquired as a gift or inheritance. Additionally, you don't qualify if you bought the home from a relative. You also don't qualify if you bought the home from a company in which you own more than 50% of the value.

The tax credit is only available if your purchase closes by December 1st, 2009. Mortgage professionals are already anticipating a rush to the closing table in November which may make it difficult to close on time if you wait until the last minute. If you have already decided to purchase a house this year buying sooner rather than later is a good strategy.

The first process to home buying is getting pre-approved by a qualified broker or lender.

Charles Welde

Phoenix Mortgage Group

Charles@Phoenixmtg.com