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The fine print – about the first time home buyers tax credit – Important!

February 9th, 2010 · 2 Comments · first time home buyers, Tax credit for first time home buyers in Macomb County MI, tips for home buyers

One of the common misconceptions for home buyers (and some real estate professionals) is that the first time home buyers tax credit is $8000 for all buyers.

When reading the fine print of the IRS form 5405 there is an entry line to fill out asking for the smaller of 2 items:  $8000 or 10% of the purchase price.

An example: Mr. Smith purchases a home for $65,000.  If he meets the criteria to receive
the 1st time home buyers tax credit he would enter $6500 on line #1 of form 5405.  If Mr.
Smith purchased a home for $90,000 then he would enter $8000 on that line.

IRS tax form for 1st time home buyers credit

Reiterating: The tax credit is for 10% of the purchase price of the home up to $8000.  It is not a full $8000 for every home buyer.

Let’s all help to stop the confusion to home buyers by using the words “Up to” in our articles.

The first time home buyers tax credit has an expiration date: You have until April 30th, 2010 to have an offer to purchase accepted, and June 30th, 2010 to close on your home.


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2 responses so far ↓

  • 1 Dawn // Feb 27, 2010 at 1:03 am

    and dont forget to tell them the following year, they will have to pay taxes on any interest gained on the credit too…..

  • 2 Kris Wales // Feb 27, 2010 at 8:09 am

    Dawn, that is true with any interest earned during the year.

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