Eligibility Requirements for the First Time Home Buyer Tax Credit

The first time home buyer tax credit is a great incentive to boost the housing market and the economy as a whole. The housing market is one of the most important indicators of overall economic stability. In order to claim this credit when filing an income tax return, some requirements must first be met. Let's take a closer look at these eligibility requirements for the first time home buyer tax credit. 

First Time Home Buyer

In order to qualify as a first time home buyer, a person or couple may not have purchased a home within the last three years. If there is a recent sale, homeowners are not eligible for the credit.

The Purchase Price of the Home

The credit is up to $8,000, and is based on 10% of the purchase price. Therefore, a home higher than $800,000 will not qualify for the credit. There is no phase out for the credit amount based on purchase price.

Closing the Loan

In order to qualify for the credit, the loan must be closed on or before April 30, 2009. The home buyers do not have to move into the home until June 30. If the loan is not closed by this date, the buyers are not eligible to claim the tax credit. If the buyers are military service members, the credit is extended until April 30, 2011. 

Income Limitations

The revised tax credit allows for people to make more money and still qualify for the credit. It is phased out at $125,000 or $225,000 for married couples. Singles are $75,000 to $95,000. A tax professional will be able to tell you how much (if any) of the credit you qualify for based on the purchase price of your home and adjusted gross income. However, the credit will always be less than 10% of the purchase price of the home.

What about non-first time home buyers?

Unlike the credits in previous years, the newest update to the credit for 2009 allows existing home owners to qualify for a credit of up to $6500 on a replacement home. If a person has lived in a home for 5 out of the last 8 years, ending at the time a new home is closed on, he or she may be eligible to receive the credit of 10% of the home's purchase price. 

Those who qualify for the credit may file on either the 2009 or 2010 tax return. It cannot be filed more than once, and tax payers will only receive the credit amount minus any existing tax liability. Lower income tax payers may be able to receive the entire credit on their return if they do not owe any taxes.