2010 Military Home Owner Tax Credit FAQ
March 4, 2010
By CPT Caitlin Chiaramonte
SGT Michael Treadwell III
Fort Benning Tax Center
FORT BENNING, Ga. – With April 15 around the corner, first-time homebuyers may be eligible for a tax credit. Read below to see if you qualify.
Q: What’s a first time homebuyer credit?
A: It is a credit given to those who have bought or plan to buy a home between 2008 and 2010. But credit was recently extended from its original purchase deadline date of Nov. 30 to April 30. To qualify, you must enter into a binding contract to buy the home by April 30 and close by June 30.
Q: Who can receive the credit?
A: Adult taxpayers who filed an income tax return and have not owned a principle residence for three years prior to the date of purchase are eligible. “Long-time homeowners” who owned and used the same residence for five consecutive years out of an eight-year period prior to the purchase date may be eligible for a credit of up to $6,500, or $3,250 if filing single. But the purchase date must be after Nov. 6.
Q. Are both spouses required to be overseas for the requisite time period in order to qualify for the 2011 extension to claim the credit?
A. Only one spouse must be overseas on official extended duty for the requisite amount of time for either spouse to be eligible for the 2011 extension of time to purchase a principal residence and claim the credit.
Q: Does this credit phase out for higher income levels?
A: The taxpayer’s modified adjusted gross income must fall within the allowed limit to be able to receive the credit. To take the full credit on purchases between April 8, 2008 and Nov. 5, 2009, the taxpayer’s modified adjusted gross income must be less than $75,000 for individual filers, and less than $150,000 for joint filers. They can still receive the credit, but it will be lower than the maximum allowable amount and based on their income level. To take the maximum credit on purchases between Nov. 6 and April 30, the taxpayer’s MAGI must be less than $125,000 for individual filers and less than $225,000 for joint filers. Taxpayers who, filing individually, make more than $145,000, or $245,000 if filing jointly, are not eligible for the credit.
Q: How big is the credit?
A: The amount and type of credit depends on the date you purchased your home. If between April 8, 2008, and Dec. 31, 2008, the maximum possible credit is $7,500. It is treated as an interest free loan, which must be paid back in equal annual installments for the next 15 years. If between Jan. 1, 2009 and April 30, the maximum is $8,000. This credit does not have to be paid back. The only rule is that the home must remain your principle residence for the next three years unless you receive PCS orders; otherwise, the credit must be repaid in full.
Q: What if I got the credit in 2008 but the 2009 credit is better?
A: Unfortunately, you still have to pay back the $7,500 and you are not entitled to the new credit. However, if you’re active duty, have PCS orders and need to move more than 50 miles from your residence or into government quarters, your payments will cease at that point and you will not have to pay the remaining balance on the original $7,500. However, this is not an automatic cessation. You need to file an income tax return to make the IRS aware of your situation and at that point, payments will not be due anymore. Extensions are available for service members and certain federal employees serving outside the U.S. They have an extra year to buy a principal residence in the U.S. and still qualify for the credit. Eligible service members must enter into their contract to buy a home by April 30, 2011.
Q: I think I qualify for the credit; what should I do?
A: The Fort Benning Tax Center can help you receive your credit by claiming it on your 2009 tax return. The Tax Center is open until April 16 for active-duty service members, retirees and family members. Keep in mind, certain credits can be revised, so check with a certified tax preparer if you recently bought a home or plan on buying one soon. For more information visit www.irs.gov or 706-545-4267.