First-time homebuyer tax credit

Your clients, a married couple, realize that this is a home-buyer’s market and are interested in purchasing a home. The couple has come to you about tax savings opportunities related to a purchase. They are newlyweds and both previously lived in an apartment.
FEB 03, 2009
Situation: Your clients, a married couple, realize that this is a home-buyer’s market and are interested in purchasing a home. The couple has come to you about tax savings opportunities related to a purchase. They are newlyweds and both previously lived in an apartment. Solution: The Economic Recovery Act of 2008, signed by former President George Bush on July 30, 2008, provides a first-time homebuyer tax credit. A first-time home buyer is defined as a person or persons who have had no ownership interest in a principal residence for three years prior to purchasing the new home. This credit gives first-time homebuyers a refundable tax credit equal to 10% of the purchase price of the home up to $7,500. The credit phases out for married couples filling jointly with adjusted gross income of $150,000 ($75,000 - $95,000 for single taxpayers). It is effective for homes purchased after April 9, 2008 and before July 1, 2009. However, the first-time homebuyer credit must be repaid in equal installments over 15 years beginning the second year after the home is purchased. The credit is claimed on the individual’s 2008 or 2009 Internal Revenue Service Form 1040, U.S. Individual Income Tax Return. If the home is purchased in 2009 after filing the 2008 Form 1040, the taxpayer has the option of amending the 2008 filing and claiming the credit on the amended return. Otherwise, the credit may be claimed on the 2009 Form 1040. If, at any time during the 15-year repayment period, the home ceases to be the taxpayer’s principal residence, the repayment of the credit is accelerated. The unpaid balance of the credit becomes due in the year in which the residence is sold or is no longer used as the taxpayer’s principal residence. The recapture of the credit does not apply in the case of the taxpayer’s death. The taxpayer will also want to adjust his or her Form W-4, Employee’s Withholding Allowance Certificate. The taxpayer will more likely than not be filing a Schedule A, Itemized Deductions, to claim the benefit of paying home mortgage interest. Depending on the rest of the taxpayer’s tax situation, Schedule A may lower the taxable income. The first-time homebuyers credit will also offset any tax liability the taxpayer may have. By increasing the W-4 exemptions, he or she will realize more take-home pay that they could invest in a 401(k) retirement plan.

Latest News

Retirement income shouldn’t be an afterthought
Retirement income shouldn’t be an afterthought

Why “one big pool of money” needs predictability—and a plan.

LPL posts record adjusted earnings as recruiting pipeline hits new high
LPL posts record adjusted earnings as recruiting pipeline hits new high

Advisor recruiting climbed to its strongest pace in nearly two years, while CEO Richard Steinmeier said the firm has "cleared the decks" for bigger institutional deals.

MirrorWeb, WealthReach ink deals to cement compliance and marketing leadership
MirrorWeb, WealthReach ink deals to cement compliance and marketing leadership

The combinations involving Red Oak and AdvisorRankings illustrate how AI is reshaping both wealth firm operations and wealthtech platforms' business models.

Kelly Park Capital streamlines private market access with PRISM 2.0
Kelly Park Capital streamlines private market access with PRISM 2.0

New 5-in-1 onboarding tool aims to cut subscription paperwork as advisor demand for private markets accelerates

Build deeper relationships and drive business through niche branding
Build deeper relationships and drive business through niche branding

Connecting unique offerings with a specific client niche is a sure path to advisor satisfaction and success – but it all has to start with an intentional strategy.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income