March 5, 2009 12:00 am

First-Time Home Buyer Credit for 2009 Purchases

Thinking of buying a home now? You may be able to cut your 2008 income taxes if you do. If you buy a primary residence after December 31, 2008, and before December 1, 2009, and you meet other eligibility tests for the first-time home buyer credit, you can opt to claim the credit on the 2008 return (you treat the home as having been purchased on December 31, 2008).

While homes purchased in 2008 only qualify for a top credit of $7,500, homes bought within the 2009 eligibility period can result in an $8,000 credit. There had been some confusion about whether the lower dollar limit applied if an election was made to claim the credit for a 2009 purchase on a 2008 return. The IRS has settled the matter, and the newly revised Form 5405 reflects the higher dollar limit allowed by the American Recovery and Reinvestment Act of 2009 for 2009 home purchases, whether the credit is claimed on the 2008 or 2009 return.

Caution: Those living in the District of Columbia who buy a first home in 2009 and who qualify for both the first-time home buyer credit and the special credit for D.C. home buyers cannot use the D.C. credit.

 

advertisement
Tax Glossary

Deductions

Items directly reducing income. Personal deductions such as for mortgage interest, state and local taxes, and charitable contributions are allowed only if deductions are itemized on Schedule A, but deductions such as for alimony, capital losses, moving expenses to a new job location, business losses, student loan interest, and IRA and Keogh deductions are deducted from gross income even if itemized deductions are not claimed.

More terms