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Understanding Tax Credits As It Relates To First Time Home Buyers

March 01, 2011 | Comments: 0 | Views: 52

The good news is that the tax credit ceiling for the year 2010 is at $8000. This amount is a slight increase from last year's $7,500. For married individuals who prefer to file their returns separately, this translates to a maximum tax credit of $4,000.

However, this maximum amount does not apply to long-term residents who plan on purchasing a new house. For these individuals, the maximum allowable credit is only $6,500. Divide this amount by two and you get the maximum allowable credit for couples that are long-time residents but who choose to file their returns individually.

When it comes to getting tax credits, the rules are often strictly construed in favor of the government and against the tax payer. An example of this rule is the denial of credit to individuals who purchase homes that cost over $800,000.This is a maximum set for people who do not qualify, since they are using a large enough amount of money that they have not demonstrating needing the credit.

For purposes of claiming tax credits, you need to acquaint yourself with the term 'first-time buyer'. In tax parlance, a first-time home buyer is a person who has not owned a primary residence within three years from the date of purchasing a new house. The term also extends to married couples provided that neither of them has previously owned a house for the same number of years.

The definition however does not include those in the U.S. Army or those working in the Foreign Service when their duty takes them outside of the United States. For these individuals, the government grants them an additional year in order to qualify for the tax credit.

Vacation home owners or those who have properties for rent can also qualify for the tax credit. In this case, the condition that they should not own a primary residence will also apply.If they already own another home, then that will probably disqualify them from receiving the credit.

For those who have bought their houses in 2008, the credit is must be paid back over a period of 15-year periods. This amount should be repaid in 15 equal installments.

However, this credit will need to be repaid in full if the house ceases to become the primary residence. In the same vein, the credit will have to be repaid in full if the homeowner sells the house within in the repayment period.

David Leek has been contributing articles pertaining to tax credits for the past 2 years. Additionally, he enjoys posting articles about NYC neighborhood topics, such as Long Island City apartments and Forest Hills real estate.

Source: EzineArticles
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