Military Tax Credit – First Time Homebuyer or Homeowner – Military & Federal Employees ONLY!
Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011. If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase.
Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community. This relief applies where a home is sold or stops being the taxpayer’s principal residence after Dec. 31, 2008, in connection with government orders received by the individual (or the individual’s spouse) for qualified official extended duty service.
The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer’s principal residence (whether inside or outside the U.S.) or while residing under government orders in government quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.
$8,000 Homebuyer Tax Credit at a Glance
- A "First-Time Homebuyer" is defined as a person who has not owned a home for the past three years.
- The tax credit is equal to 10 percent of the home’s purchase price up to $8,000.
- The credit is available for homebuyers who enter into a written binding contract prior to April 30, 2011. The buyer will then have to close prior to June 30, 2011.
- Homebuyers may purchase any new or existing single dwelling home including condos and townhomes.
- The tax credit does not have to be repaid if the home isn’t sold within three years of purchase.
- The tax credit is "refundable" or claimable for the year of purchase regardless of the homebuyer’s tax liability.
- Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.
- The homebuyers may participate in a mortgage revenue bond program such as NIFA and still be eligible for the tax credit.
First-Time Homebuyer Tax Credit example:
A couple with joint income less than $225,000 annually.
The couple enters into a binding contract to purchase a home prior to April 30, 2011 and closes on their new home prior to June 30, 2011. The couple qualifies for the full $8,000 tax credit.
Assume their 2009 federal tax liability is $12,000 without the tax credit, the $8,000 tax credit would lower their federal tax liability to only $4,000.
If the couple’s 2009 federal withholdings was exactly $12,000, they would have received no refund without the tax credit because their federal income taxes equal their federal withholdings exactly.
With the first-time homebuyer tax credit, the couple will get a tax refund of $8,000.
First-time homebuyers should consult their tax advisor for more information.
$6,500 Homebuyer Tax Credit at a Glance
- A "Current or Existing Homeowner" for the purposes of this credit must have used/occupied their home as a principal residence consecutively for 5 of the previous 8 years. You are NOT required to sell your current personal residence to qualify for this $6,500 tax credit.
- The tax credit is equal to 10 percent of the home’s purchase price up to $6,500.
- The credit is available for homes place under contract prior to April 30, 2011 which then needs to close prior to June 30, 2011.
- Homebuyers may purchase any new construction or existing single dwelling home including condos and townhomes.
- The tax credit is “refundable” or claimable for the year of purchases regardless of the homebuyer(s) tax liability.
- Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.
Existing Homeowner Credit example:
A couple with joint income less than $225,000 annually.
The couple has owned a personal residence consecutively for 5 of the last 8 years and sells this home to purchase a new home for $200,000 which takes place prior to April 30, 2011. The couple qualifies for the $6,500 tax credit. Please note that you are NOT required to sell your current personal residence in order to qualify for this $6,500 tax credit.
Assume their 2009 federal tax liability is $12,500 without the tax credit, the $6,500 tax credit would lower their federal tax liability to only $6,000.
If the couple’s 2009 federal withholdings was exactly $12,500, they would have received no refund without the tax credit because their federal income taxes equal their federal withholdings exactly.
With the Existing Homeowner Tax Credit, the couple will get a tax refund of $6,500.
Real estate buyers and sellers who are interested in the existing or prospective home buying programs should seek additional information and professional advice. You may also refer to the following websites/phone numbers: IRS http://www.irs.gov/ 800-829-1040. Please remember that this program on applies to members of the military and certain other federal employees serving outside the U.S. |
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