Curious about the $8,000 home tax credit for first-time homebuyer?  If you’re in the position to claim this tax credit, you’ve most likely read plenty about it.  The gist is simple,  homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. This home tax credit:

• Applies only to homes used as your principal residence.
• Reduces your tax bill or increases your refund, dollar for dollar.
• Is a fully refundable tax credit, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

Checkout this one minute and 29 seconds video by Hector from the IRS explaining the first-time home buyer tax credit.  If you don’t want to watch the video, a summary of the highlights can be found below the video.

Qualifying and Claiming the $8000 Home Tax Credit

• You may qualify for the home tax credit if you bought a home in 2009 or you’re considering buying one this year.
• You qualify as a first-time home buyer if either you or your spouse haven’t own a home in 3 years.
• If you’re buying a home this year (2010), you must sign a binding contract by April 30th, 2010, and close no later than June 30th, 2010.
• Also, if you’re a long-time home owner, and you’re purchasing a replacement home for your principal residence, you may qualify for a credit up to $6,500.
• If you bought the home in 2010, you have the option to claiming the home tax credit either on your 2009 or 2010 tax return.
• To get the credit this year.  File your tax return, attach form 5405 and supplement documents (such as copy of settlement statement).
• Important: To claim the tax credit this year, you must file the tax return on paper. You won’t be able to claim the credit on e-file as the current e-file system isn’t able to handle the supporting documents that must be submitted along with the home tax credit.

Tax Forms You Will Need

• Good old Form 1040 (report it on line 67 for the 2009 return)
• Form 5405 (attach with return)

Additional Resources:

• Questions and Answers on home tax credit from IRS
• Additional Questions and Answers (qualifying, due dates, etc.)
• Filing requirements on the home tax credit

Before you start setting up various financial New Year resolution goals, one quick exercise you should probably do is to focus on prioritizing  your financial weakness that cost you the most money.  Whether it’s lack of will power in spending, inability to comparison shop properly, impulsive financial decisions, risky stock purchases — we all probably have made a number of blunders that has cost us more money than we’d care to admit.

The reason why I believe it’s important to focus on the weakness or mistakes that cost you the most money, is simply because the return on time investment will have a more meaningful financial impact.  Unfortunately, whether or not it’ll be easy for you to fix or improve that particular financial weakness will be another story.

But take heart, although baby steps are a perfectly legitimate way in bettering yourself, there really isn’t anything wrong with trying to tackle a big problem and failing — after all, none of us are perfect.  Maybe you tried to cut your monthly lavish spa treatment but was only able to stick to the gun for 2 months.  So what?  That two month’s worth of savings is decisively better than never taking the initiative to save.

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January 5, 2009 – Rescuing Fannie Mae

(source)

The Federal Reserve Bank of New York begins purchasing fixed-rate mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae under a program first announced on November 25, 2008.

January 12, 2009 – Allocating TARP Funding

At the request of President-Elect Obama, President Bush submits a request to Congress for the remaining $350 billion in TARP funding for use by the incoming administration.

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Maybe you just got robbed by Zorro or maybe there’s now an unexpected child support payment (oh snap!?) — whatever the circumstances are, would you be able to live on half of your income?

A few years ago, I was reading a blog post by Trent at The Simple Dollar regarding living on half of your income, and at the time I thought to myself:  “Well that’s nice. So instead of thirty Cup Noodles per month, I get to eat only fifteen? That’s totally doable.*”

(*Cool kids often use the word doable back in the days).

But time has changed. I’m now a hard-working member of society (sort of) and I’m no longer a dreadful leech on my parents (again, sort of).

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Some may wonder if its redundant to pass legislation that’s similar to regulation already imposed by banking regulators, but regardless, the newly minted Credit Card Accountability, Responsibility, and Disclosure Act of 2009 has been signed into law.

Here’s the breakdown on the changes when the law comes into effect February 2010.

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Half a decade ago when I was 19, I was sitting in a hospital waiting room as a family member underwent a medical procedure.

Spying a cute girl of similar age across the room, I proceeded to try and “look smart” by picking up the local newspaper so I can pretend to read it — but of course my real intention at the time was to have an easier means to take the occasional peek at the cute girl.

Ah. The shaping of a future creepy stalker. I’m not sure why I added this story to the post, but, there it is.

What really caught my eyes that day though was a story in the local newspaper about “killer” medical bills – medical billing errors that were so drastic that it affected the entire financial well-being of a family.  Apparently, a fat-finger mishap occurred where the hospital billing department mistakenly typed in the wrong billing code for the procedure done in the hospital, and the minor clerical error resulted in a fatigue-inducing, long drawn-out battle with the hospital over the medical bill.

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A recent instant message from my younger cousin pointed me towards the deliciously funny website: fmylife.com, which basically contains various stories and tidbits about how much one’s life sucks.

For example, here’s the top rated FML (f– my life):

Today, I received my passport in the mail. They got my birth date wrong. Then I picked up my birth certificate that I had sent in with the application. Turns out my parents have been celebrating my birthday on the wrong day for 16 years. FML

As with many websites geared towards sinking time,  fmylife.com can often be a funny yet sad read.  The reason why I pointed out this website was not to spread further misery, but to acknowledge the fact that, sometimes, life can throw a sucker punch in your face, and there’s not much you can do about it.

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If you’re still on the fence about acquiring a home, then Uncle Sam has just thrown an extra incentive for those of you that’s still debating on waiting further or buying — a nice fat, $8,000 incentive (it’s not $15,000 but you take what you can get, eh?).

Since they’ve been throwing around a bunch of different numbers and qualification scenarios, here’s the fairly-certain low down on the new home buyer tax credit.

To Qualify for the $8,000 “First-Time” Homebuyer Tax Credit:

• Home purchase must be made between January 1, 2009 and November 30, 2009.
• Must be a “first time buyer.” In order to qualify for this status, you must not have owned a home for the past three years.
• You must also live in the purchased house for at least three years, or you’ll be obligated to pay back the tax credit.
• Homebuyers must make less than $75,000 for single tax filers, or $150,000 for couples.
• Higher-income buyers will receive a partial tax credit, but details have not yet been fully released.
• Single family residence purchases (condominiums, townhouses, co-ops) that will be used as a principal residence will qualify.

How to Claim the Homebuyer Tax Credit:

• Simply claim it on your tax return.  You will not have to filed any other forms or papers.  If you’re not a procrastinator like me and you’ve already filed your taxes, you can simply file an amended return for 2008 to claim the credit.
• What type of tax credit is it? It’s one of the better type: a refundable one.  This means that if you don’t owe any taxes, you will get any excess credit in the form of a fat refund check.  Example: If you owe $1,000 in taxes, you’ll get a $7,000 refund check.  If you’ve overpaid $1,000 in taxes, then you’ll get a $9,000 check. You can read more about refundable tax credit in the resource link below.
• If you’ve already claimed last year’s $7,500 tax credit, then you won’t be able to claim the $8,000 credit on next year’s return. It’s one credit or the other, buddy.
• Unlike the previous $7,500 tax credit, there’s no repayment required for this $8,000 tax credit!  (Unless of course you sold your house within three years, as stated earlier).

Other Miscellaneous Notes:

• If you’re buying into a retirement community, unfortunately, the purchase won’t qualify for the $8,000 first-time homebuyer tax credit.

This post will be updated as the IRS release further details upon their interpretation of the just-passed American Recovery and Reinvestment Act.

Regardless if you think the first-time homebuyer tax credit in the stimulus bill is a smart move or that it’s entirely bullsh*t  — the tax credit will certainly be a nice bonus for those that are looking to purchase a home in 2009.