How to Qualify for the First-Time Home Buyer Tax Credit

The first-time home buyer credit is a great incentive to purchase a home. If you buy a home and close by April 30, 2010, you will be able to claim the credit on this year's taxes. With an $8,000 tax credit, there is no reason to sit on the sidelines anymore. Now is the time to take advantage of low home prices and great interest rates. As long as you meet the criteria, you will be able to claim the first-time home buyer's tax credit.

What Is a First Time Home Buyer?

A first-time home buyer is anyone who has never owned a home or someone who has not owned a home in the past three years. If you are married and your spouse owns a home but you do not, then neither of you will be able to claim the credit.

Who Is Eligible?

Anyone who meets the first-time home buyer test is eligible to receive the tax credit as long as she puts in a contract on a home by April 30, 2010, and closes on the home by June 30, 2010. To qualify, the home buyer may not be claimed as a dependent on anyone else's tax return.

Income Limits

There are income limits in place for the current federal tax credit. If your income is less than $125,000 for single filers or $225,000 for married filers, you will qualify for the entire credit. The tax credit will be phased out for those over these limits, and any single filer making more than $145,000 and married filer making more than $245,000 will not be eligible for the credit.

Types of Homes

Most homes are included in the tax credit as long as they are less than $800,000. As long as this home will be your principal residence, then any single family home, townhouse, condo, houseboat or mobile home will qualify.

Claiming the Tax Credit

When filing your federal income taxes, you will complete IRS form 5405. Line 67 states "first-time home buyer," and here you will enter $8,000. No other forms are necessary, but make sure you meet the requirements for claiming the credit. You cannot claim the credit for a future purchase; it must fall within the proper date limits. You must meet the first-time home buyer test, you must be in the income guidelines and you be purchasing a qualifying home. If all of these criteria are met, then you may claim the credit. A credit will reduce your tax liability dollar for dollar. This is unlike a deduction, which will only reduce it by a percentage of the dollar amount. This tax credit is refundable, meaning if you owe less tax then the credit is worth, you will receive a refund for the remainder dollar amount.