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First Time Homebuyer Credit – Five Fast Facts For 2011

If you purchased a home as your primary residence in 2008, 2009, or 2010, you may be eligible for the first time homebuyer credit. We’ve compiled a list of five facts about the homebuyer credit based on the most frequently asked questions.

1.  Depending on the tax you owe, the first time homebuyer credit will either reduce your tax bill or increase your refund. The IRS will refund the credit even if you owe no tax or the credit is more than the tax owed.

2. Eligibility for the homebuyer credit does vary based on the year of your purchase. New legislation implemented in July of 2010 extended the closing deadline from June 30 to September 30, 2010. However, some members of the military and other federal employees do get additional benefits, including an additional year to buy a home in the United States.

3. You may have to repay the homebuyer credit if you bought your home in 2008. The IRS requires a $500 payment per year until the credit amount is reached, similar to an interest free loan. Be aware that if you sell your home within three years after receiving credit whether you are required to make payments or not, the repayment may be due in full.

4.  Legislation passed in November 2009 made a long time homebuyer credit available to long time residents of the same main home if they purchased a new main residence. To be eligible for this credit, you must show that you resided in the previous home for five consecutive years in an eight year period ending on the new home’s date of purchase.

5. Taxpayers who have owned rental property within the past three years are still eligible for the credit, as long as they have not owned and used a home as his or her principal residence within the last three years. For instance, if you own a home in another state as an investment property and are renting it out, you would still qualify for the first time homebuyer credit.

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