PARK CITY FIRST-TIME HOMEBUYER TAX CREDIT :: $8000
The latest economic stimulus plan signed by President Obama includes a tax credit of $8000 for first time home buyers. This tax credit is a real boost for home buyers in the Park City and Deer Valley area. While first time buyers are a scarce group in the Park City and Deer Valley areas due to the high cost of real estate here, there are many opportunities in the outlying areas of Park City that may be perfect for first time buyers.
The Park City real estate neighborhoods of Pinebrook, Kimball Junction, Jeremy Ranch, Summit Park, Trailside Park, Silver Springs, Olympic Park, Park Meadows, Prospector and Old Town all have real estate opportunities that may be appropriate for first time buyers. Many parts of Summit County and Wasatch County including Kamas, Francis, Oakley, Heber and Midway can provide a first-time homebuyer easy access to Park City within a 15 minute drive while being priced well within most first-time buyers capabilities.
The $8000 tax credit being offered can be a great boost for Park City area buyers. Here are a few things to know:
The $8000 tax credit applies to purchases of principal residences by first-time buyers on or after January 1, 2009 and before December 1, 2009.
A principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling.
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.
Tax credits are much more powerful than deductions; every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 - $8000 = $1500)
The tax credit is what’s called “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference between $8000 credit amount and the amount of tax liability. ($8000 - $6000 = $2000) Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.
There is an income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.
How the property is financed does not affect eligibility for the tax credit. The tax credit does not have to be repaid. There is the possibility of a “recapture” if the property is held for less than 3 years.
There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.
While the program does not allow you to use the credit as a down-payment and the benefit of the credit does not show up until April of 2010, you are able to change your withholding from your paychecks to increase your current take home pay to account for the upcoming tax credit.
The $8000 tax credit for first-time buyers in Park City should prove to be a great asset during 2009. For more information and to know exactly how this program can benefit you be sure to consult with your tax accountant or attorney.