Long Time Homebuyer Credit 2010

Long Time Homebuyer Credit 2010

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In 2008, former President George W. Bush and the U.S. government introduced the first-time homebuyer credit to encourage people to get off their keisters already and take the first-home plunge, as part of the Housing and Economic Recovery Act of 2008. The credit was launched to revitalize the languishing American housing market, which began an epic free fall in 2006 [sources: Baker, The Economist]. In addition, the entire housing business community felt more than a little pinch, with builders and suppliers losing megabucks with each passing month.

The original tax credit (think of it as version 1.0), was available to first-timers who closed on homes between April 8, 2008, and Jan. 1, 2009. It functioned like an interest-free loan, all of which had to be paid back over a 15-year period by way of the purchaser's federal income tax return. So, for people who received the maximum $7,500 credit, this averaged out to $500 per year, beginning with their 2010 tax returns [source: IRS]. For most people, the credit repayment uses IRS form 5405, \"Repayment of the First-time Homebuyer Tax Credit,\" which is filled out and attached to Form 1040.

The credit was available to first-time homebuyers during the time frame of April 8, 2008 to May 1, 2010, for the purchase of a full-time dwelling only. In other words, no fair buying it and then turning it into a profitable rental or vacation home! Interestingly, if a person purchased the residence and lived there full time, she could then rent out other portions of the home and still be able to receive the credit [source: IRS].

The term \"first-time buyer\" was relatively flexible, as the credit was up for grabs to those who had never owned a home, or who had not owned a residence in at least three years [source: Manni]. The amount available ranged from 10 percent of the home's purchase price, up to a max of $7,500 or $8,000, depending on year of purchase. So, homebuyers in at least the $75,000/$80,000 price range were able to take full advantage of the perk.

In a twist that pleased many, the U.S. government expanded the credit to long-time homeowners just itching to upgrade to a replacement home. Purchase had to take place after Nov. 6, 2009, for a maximum $6,500 credit [source: IRS]. Long-time homeowners were defined as having owned and used the property as a principal residence for a minimum of five years. That half-decade period had to take place consecutively within the eight years before applying for the credit [source: Bell]. For families or other owners interested in shedding a starter home for something roomier, this credit was just the kick in the pants they needed to start house-hunting, if with a little bit of extra caution.

Provided a person qualified as a first-time homebuyer or a long-time homeowner, there were a few basic regulations that had to be followed. Pretty much any type of principal residence could be purchased, as long as it could be affixed to land. So, single-family houses, townhomes, apartments, duplexes, mobile homes and even travel trailers (so long as they were affixed) qualified. RVs, however, were considered personal property not attached to any particular tract of land, so they were not eligible to redeem the credit. By the same token, a potential buyer who had lived in an RV was considered a first-timer, and therefore able to receive the credit if permanent home ownership became enticing.

And now for the million-dollar question: Was the first-time homebuyer tax credit a success, or an epic disaster As with many things government-related, that all depends on who you ask. The U.S. government spent $16.2 billion in an effort to boost the housing market, with 2.3 million people participating in the credit program. According to the Center for Economic and Policy Research (CEPR), the credit did help to initially boost home sales and prices, although relatively modestly, until the program expired in April, 2010. This occurred because people who would have otherwise waited a year or two to purchase decided to flood the marketplace to take advantage of the credit. However that left a dearth of buyers for the rest of 2010 and 2011. Housing prices fell another 8.4 percent from second quarter 2010 (the end of the program) to the end of 2011. They continued falling well into 2012 [source: Baker].

If you purchased your first home from 2008 to 2010, you might have qualified for the first-time homebuyer credit. This tax credit provided financial assistance to offset the cost of making a down payment, either in the form of a refundable tax credit or an interest-free loan.

The first-time homebuyer credit was a refundable tax credit you could claim on your 2008, 2009, and 2010 federal income tax returns. It was available to couples and individuals who purchased a new home anytime between April 8, 2008, and May 1, 2010. This credit was created in response to the 2008 recession as part of the Housing and Economic Recovery Act (HERA).

When the credit existed, it had three distinct periods and sets of rules for claiming it, depending on when you purchased your home. The credit amounted to the lesser of 10% of your qualifying primary residence's purchase price or $7,500 (or $8,000 if you purchased your primary home anytime between 2009 and May 1, 2010) if you filed as either a single taxpayer or joint married couple.

If you purchased your home (with or without your spouse) between April 8, 2008 and November 6, 2009, but owned a house at any time during the three years before the purchase date, you aren't eligible. In other words, you wouldn't count as first-time homebuyers if either you or your spouse owned a home in the three years preceding the home purchase.

To repay the first-time homebuyer credit, you are required to make 15 equal payments between 2010 and 2025. You report these payments on Form 1040, Schedule 2. The net balance from this schedule then gets reported on your Form 1040 tax return.

As you may or may not remember, the housing market in 2008 was in quite a slump, the type of slump that sent lawmakers scrambling to find ways to get the housing market back on the right track. From April 2008 to May 2010, many first-time buyers received either a $7,500 or an $8,000 first time homebuyer tax credit (unless two married individuals are filing separate returns). To be eligible for the first time homebuyer tax credit at the time, the buyers were not allowed to have owned another principal residence at any time during the three years before the date of the purchase of the new home.

The first-time homebuyer credit was available for qualifying homebuyers who purchased their homes in 2008, 2009, or 2010. Only homebuyers who purchased their home and took the credit in 2008 have to repay it.

Given the complexity of the issue, we recommend that you check out the IRS site on this issue if you received the first-time homebuyers credit and are considering selling your home. Tax consideration is just one facet of the selling process, make sure you have a top local listing agent on your side. We are helping sellers throughout the country find their listing agents every day! If you are interested in having top local agents compete for your listing, submit a FREE and no obligation REQUEST on our site today!

Two of the more popular federal recovery programs of 2009 was the tax credit provided to first-time homebuyers. To qualify, the taxpayer needed to prove it was his or her first home purchase and that it would be the primary residence.

Comparing the popularity of this credit by state, we calculated the number of first-time homebuyers per 1,000 population for each state (based on 2010 Census population figures). Nevada by far had the most claimants of this credit, at 13.7 per 1,000. Nebraska was a bit further behind, at 11.9, along with North Dakota (11.7), Idaho (11.6) and Arizona (11.4).

Overall, a little more than 62,000 Hoosier homebuyers received $426 million in tax credits in 2009 and 2010, with an average of $6,868 in credit per qualifying taxpayer (see Table 1).

When the Great Recession hit, the federal government enacted legislation meant to help revive the economy. The first-time homebuyer credit was part of that legislation. The tax credit was for individuals and couples who purchased a new home between April 8, 2008, and Sept. 30, 2010.

Although the first-time homebuyer credit is no longer available, the federal government offers and backs several mortgage programs to help homebuyers. You can also check whether your state or city offers closing-cost and down-payment assistance.

The credit is based on 10% of the purchase price of property that is used as the purchaser's principal residence. For purchases before 2009, it is limited to $7,500, which generally must be repaid over a 15-year period that begins with the second tax year following the tax year for the year of purchase. For purchases after 2008, the credit is generally limited to $8,000, but that limit is reduced to $6,500 for \"long-time residents.\" Repayment is not required unless taxpayers cease to use the property as their principal residences within three years of the date of purchase.

There are some limitations on qualifying for the credit. No credit is allowed for property (1) located outside the United States; (2) inherited; (3) purchased from a close relative; or (4) purchased by a non-resident alien. Property purchased in 2008 will not qualify if financed with the proceeds of tax-exempt mortgage revenue bonds, or if the purchaser qualified for the first-time homebuyer credit in the District of Columbia in 2008 or earlier. Certain additional restrictions apply to purchases made after November 6, 2009: (1) residences costing more than $800,000 will not qualify; (2) purchasers must be at least 18 years old; and (3) purchasers cannot be eligible to be claimed as a dependent on another taxpayer's tax return.

Homebuyers who were unable to close on their purchases by the June 30, 2010, deadline imposed by the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92) have been granted an additional three months in which to complete their sales and still qualify for the first-time homebuyer tax credit. On July 2, 2010, President Obama signed H.R. 5623 (P.L. 111-198), which was introduced and passed by the House on June 29, 2010, and passed in the Senate by unanimous consent on June 30, 2010. The law's provisions to extend the homebuyer tax credit mirror those contained in an amendment to H.R. 4213 that was offered by Senator Reid.1 The law only affects those people who would have qualified for the credit if they had completed their purchase before July 1, 2010. This means that before May 1, 2010, they must have entered into a binding contract to purchase a residence and that contract must have called for closing before July 1, 2010. Those who had such contracts, but were unable to close on the sales by June 30, 2010, are allowed to close before October 1, 2010, and treat the purchase as if it had occurred before July 1, 2010. 59ce067264

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