You have heard about the $8000 you can get back on taxes if you buy a new home and qualify. Here are some details as I best understand it. Remember to verify all details with your tax professional. Is it a Tax Credit or a Tax DeductionA tax credit reduces your taxes owed. If you owe $8,500 in taxes and apply the $8,000 tax credit, your tax bill is reduced to $500. If you have already paid $9,000 through payroll deductions or estimated tax payments, you will get a refund of $8,500. If you have a refund coming then you add the $8000 to your refund! A tax deduction is a reduction against earned income. If you made $100,000, an 8,000 tax deduction would simply reduce taxable income to $92,000, and you would pay taxes on that lower income. If you are paying taxes at a rate of 20% that would reduce your tax bill by $1600. That's a big difference! How Does the $8,000 Home Buyer Tax Credit Work?If qualified you can receive a tax credit of 10% of the purchase price, with a maximum credit amount of $8,000. This means if you buy a home for $80,000 or more, you can deduct the full $8,000 tax credit from your total taxes. You can also amend your 2008 return and take the deduction in 2008, if you so desire. The $8,000 tax credit is not a loan and does not need to be repaid. You still qualify if you financed your home purchase with state or local bond funding. if you sell that home within the first 3 years of ownership, the entire amount of the tax credit is recaptured by the IRS. That means it must be paid back. Qualifications for the $8,000 Home Buyer Tax Credit1. Only first time home buyers (you have not owned a home in the last 3 years) are eligible. 2. The home must be your principal residence. 3. Only homes purchased on or after January 1, 2009 and before December 1, 2009 qualify for the tax credit. 4. Limited to individuals with adjusted gross incomes of $75,000 as a single person or $150,000 filing jointly. There is a phase-out for single incomes between $75,000 and $95,000, and for couples filing jointly with incomes between $150,000 and $170,000. Be sure to talk to your tax professsional for upto date details and see if you qualify. |