Question: My husband and I are looking to buy our first home. Since our annual income is around $34,000, we tend to get all of our tax money back at the end of the year (at least until I'm out of college). Is the tax credit a wash for us? Thank you for your help, Leslie, Lemon Grove, CA
Answer: No, it should be a real financial help for you. The tax credit is for qualified first-time home buyers that purchase a primary residence between January 1, 2009 and before December 1, 2009. The tax credit is equal to 10% of the home's purchase price up to a maximum of $8,000. You should qualify for the credit since you're a first time homebuyer and you come in under the income limits. (For instance, the income limit for married taxpayers is $150,000, and it phases out at modified adjusted gross income of $170,000.)
Like most tax law changes, the $8,000 homebuyer credit has created a lot of confusion. The National Association of Home Builders offers up detailed information on the tax credit here. I've also answered a number of other question on the credit on the Getting Personal blog.
Your question is about the tax implications. You have a choice when it comes to filing for the credit. You can amend your 2008 tax return to get the money quicker or you can elect to file for the credit on your 2009 return. However, you must have purchased the home before filling for the credit.
There is additional news this week on the $8,000 tax credit front: The Federal Housing Administration (FHA) has come up with new rules that allow new home buyers using an FHA-insured mortgage to tap the credit to pay for closing costs and the down payment. The lender must be FHA approved. You can find a list of qualified FHA lenders by tapping into this database. New home buyers still need to come up with an initial 3.5% down payment before taking advantage of the credit money.
You can read the official FHA statement on the program here.