First Time Homebuyer Credit is a HIT!
Preliminary numbers from the Internal Revenue Service suggest 1.4 million taxpayers will claim the federal first-time homebuyer tax credit on their 2008 tax returns, meaning the program is likely to meet or exceed the 2 million target set by lawmakers before it sunsets Nov. 30, 2009.
A report by the Treasury Inspector General for Tax Administration, which looks at 56.9 million tax returns received through March 6, revealed that 567,685 households claimed the tax credit, but 38,158 weren't eligible because they may have been homeowners in the last three years.
If those trends hold up for all 140 million tax returns the IRS expects this year, about 1.4 million households will claim the first-time homebuyer tax credit, but about 94,000 of those will be disqualified because they are not first-time homebuyers.
A first-time homebuyer is defined as anyone who hasn't had an ownership interest in a principal residence for three years, and income limits also apply.
IRS Form 5405 will allow qualifying buyers to claim the credit on either their 2008 or 2009 tax returns, so many people purchasing homes this year won't be claiming the credit until next year. The credit is equal to 10 percent of the purchase price of the home, and is capped at $8,000 for homes purchased this year.
The American Recovery and Reinvestment Act of 2009 raised the cap to $8,000 for homes purchased before Dec. 1 of this year, and eliminated the repayment requirement unless a home is resold within three years
Congress allocated $13.6 billion for the program in the hopes of encouraging 2 million home purchases to stem the decline of housing markets. But there's no provision to end the program early if it exceeds those limits.
