Ask The Money Coach

By Lynnette Khalfani-Cox, The Money Coach

It’s a great time to buy a home. Mortgage rates are pushing down below 5%, homes are more affordable than they have been in nearly a decade, and there’s a tax credit of up to $8,000 waiting for many buyers. To determine if you qualify for the tax credit under The American Recovery and Reinvestment Act of 2009, follow the checklist below.

You qualify for the tax credit if you meet all of the following:

1. You are a U.S. citizen or a qualified U.S. resident. If you have a valid Green Card or are otherwise a U.S. citizen or resident, you should qualify for the tax credit. Non-resident aliens as defined in IRS Publication 519 will not qualify.
   
2. You or your spouse have not owned a home as your primary residence in the last three years. If you have owned a vacation home or rental property you will still qualify for the tax credit so long as you haven’t owned a primary residence since the start of 2006.
3. You purchase or build a primary residence. Any home you will use as your primary residence will qualify for the tax credit. This includes existing or new construction single-family detached homes, townhouses, condos, mobile homes and even houseboats, if that houseboat will be your primary residence. If you hire a contractor/architect to build a home on land you already own, you will also qualify provided construction is complete and you move in between January 1 and December 1, 2009. You will not qualify on the purchase of rental property or vacation homes.
4. The home purchase date (i.e. “the closing”) occurs on or after January 1, 2009 and before December 1, 2009. Note, if you close on the home sometime during December this year, even if you entered into the contract in October or November, you will not qualify for the tax credit.
5. You make less than $95,000 as an individual or $170,000 filing jointly. If you make less than $75,000 filing as single or head of household, you should qualify for the full $8,000 (if the home costs at least $80,000, otherwise you will receive 10% of the purchase price). If you make less than $150,000 as married, filing jointly, you should also qualify for the full $8,000. If you make more than these amounts, but under $95,000 as an individual or $170,000 filing jointly, you will qualify for a lesser amount. If you make more than those upper figures, you will not qualify at all.
6. You claim the tax credit on your federal income tax return. Complete IRS form 5405, which will help you determine how much of the $8,000 credit you qualify to claim. Put the determined amount on Line 69 of your 1040 tax return.

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