Being a first time home buyer does not necessarily mean it must be the first house that you have ever purchased. A first time buyer is considered by the law to be an individual who has not owned a primary place of residence within the three years prior to the ongoing purchase. Even though you may have bought a primary residence a few years prior to this purchase and rented for a couple of years, you still have the possibility to be eligible for the first time with a new home buyers tax credit.
Dissimilar to the initial tax credit that was passed in July of 2008, this is an authentic tax credit and not a loan, which is interest free. The initial plan was an interest free loan in the beginning, then it became obligatory to repay the money over time.
This new law does not require you to repay this loan. Even though it is a true tax credit, there are few restrictions which apply.
In order to bypass re-paying the tax credit money, the home buyer must use the residence as a primary residence for a minimum of three years. If you decide to obtain the credit and then you sell the residence or leave it within the first three years of living in it, you may be obligated to repay a portion of the tax credit amount. When debating whether or not to obtain this credit for your home purchase plans, it is important to seek professional tax advice.
Applying for the credit is a fairly simple process. In order to claim your tax credit on your federal tax return, it is mandatory to fill out the IRS Form 5405 in order to decide the amount of tax credit. After the credit has been decided, this amount is placed on line 69 of your regular 1040 income tax return. There are no other qualifications or any paperwork that must be completed. However, it is important to contact and discuss with your tax preparer prior to claiming the credit in order to be assured that you are qualified.