How to Claim For Federal Tax Credit If You Are a New Home Owner

The first time or the new home owners who have not owned any house in the past three years need to know that they might be qualified for a federal tax credit up to eight thousand dollars. This federal tax credit is basically provided by ARRA (American Recovery and Reinvestment Act) to facilitate both the new and the existing home owners. This federal tax credit can also be acquired in the condition if one does not owe any federal taxes.

There are certain eligibility requisites that need to be met to acquire federal tax credit. If one is a first time home owner, then the very first eligibility condition is that the home should be in United States. The second condition is that this home needs to serve as the principal home of the home owners and it should not be a rental property. The next perquisite is that the sale and purchase transactions need to be completed by the end of the each financial year. The next condition is that the house should not be purchased from one family member such as parents, grand parents, spouse or any other close relative.

The home whose value is less than eighty thousand dollars, the credit limit upto which one can acquire federal tax credit is maximum ten percent. The last but very significant precondition is that the income of the home owner needs to be less than the maximum credit limit allowed.

Apart from the general preconditions, there are certain income requisites that need to be met if one is looking to come out as an eligible candidate for federal tax credit. The full credit limit of the eligible candidates has to be modified adjusted gross income of $75,000 per year and if one is married, it has to be a joint limit of $150,000. Talking of the partial credit, the tax payers who are on individual basis filing MAGI (modified adjusted gross income) of $75,000 to $95,000 are eligible for a partial federal tax credit. In the case of partial credit, if one is married, then one needs to file a joint return of $150,000 to $170,000 to become eligible for federal tax credit.

The tax payers who are on the individual basis filing a MAGI of $95,000 and are jointly filing of amount more than $170,000 are not considered as eligible candidates for federal tax credit. Claiming for a federal tax credit is not a tough thing as one can get by amending the last year’s tax return or by claiming the credit on the current year’s tax return. To claim for the federal tax credit, tax payers have to complete the FORM 5405 by entering the particular amount verified on the line number 69 of the federal tax return. One can also take professional help when it comes to filing the federal tax returns and coming out as eligible candidate for the federal tax credit.