For first time home buyers one of the most confusing things to understand is the first time home buyer tax credit 2016 because of all of the myths surrounding it. Perhaps the biggest reason why this topic creates so much confusion is because of the US tax code itself, which contains a whopping 73,000 pages of code and only a handful of those lines are related to home tax issues.
In order to gain some understanding about tax code, you need to realize that there is a difference between a tax credit and a tax deduction. Credits and deductions reduce your tax burden, but a credit reduces the tax burden dollar by dollar, while a tax deduction reduces the tax burden based on your current tax bracket. For example, if you are in the 28% bracket, a $1,000 tax deduction will reduce your taxes by $280 dollars, while a $1,000 tax credit will reduce it by $1,000.
When it comes to understanding the first time home buyer tax credit, the first thing you need to know is that it actually ended in 2010. However, just because the first time home buyer tax credit ended for home buyers in 2016, it can still be used for certain homes that were purchased in 2008, 2009, and 2010 by first time home buyers. To qualify for this tax credit you must have purchased the home between April 9, 2008 to April 30, 2010, and you must have closed on the home no later than September 30, 2010. Income qualifications and the other guidelines are still in place no matter when you claim the tax credit.
Although the first time home buyer tax credit is no longer available, there are still several other tax credits that first time home buyers need to be aware of. As a first time home buyer, be sure to take advantage of the mortgage interest deduction, Mortgage Credit Certificate, mortgage points deduction, real estate tax deduction, and tax-free IRA withdrawals.