AMERICAN RECOVERY AND REINVESTMENT ACT - $8,000 TAX CREDIT

"The new credit can get money in the pockets of first-time homebuyers quickly," said IRS Commissioner Doug Shulman. "For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they've already filed their tax return."

How the tax credit works
The bill provides up to an $8,000 refundable tax credit (or up to 10% of the purchase price). If the property is $75,000, the credit is only $7,500.

• The credit is available to first-time buyers of a principal residence on or after January 1, 2009 and before December 1, 2009. This is someone who did not own another main home at any time during the three years prior to the date of purchase.

• The credit does not require repayment. The credit will be claimed on a tax return to reduce the purchaser's income tax liability.

• If the buyer's tax liability in the given year is less than $8,000, the IRS will send a refund for the balance.

According to the 2008 IRS Tax Tables: A single filer would need $46,600 in taxable income to have $8,000 in tax liability. A couple would need $58,600 in taxable income to have $8,000 in tax liability.

• Taxpayers whose income is more than $75,000, or $150,000 for joint filers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

Exceptions
If any of these conditions exists, the credit will not be available.

• Income exceeds the phase-out range. $95,000 for individuals, $170,000 for couples.

• The home is purchased from a close relative. This includes spouse, parent, grandparent, child or grandchild.

• You stop using your home as your main home.

• If the home is sold prior to three years of ownership, the tax credit must be repaid.

• You are a nonresident alien.

How to file
(This information published by the Internal Revenue Service. IRS Newswire, March 18, 2009)

For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they've already filed their tax return.

The credit may be claimed on 2008 tax returns due April 15 or on 2009 tax returns next year.

The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

The filing options to consider are:

• File an extension - Taxpayers who haven't yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.

• File now, amend later - Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.

• Amend the 2008 tax return - Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.

• Claim the credit in 2009 rather than 2008 -This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

If you have questions about the $8,000 tax credit or are interested in buying or selling property in the Lowcountry, please don't hesitate to call Owen at 843.224.5398 or e-mail Owen@OwenTyler.com.