Buried in Friday’s signed, sealed, and delivered Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was a provision retroactively approving the $5,000 tax credit for first-time home buyers in DC for 2010, and extending it through 2011 as well. Home buyers will remember that the credit, last approved as part of the 2008 stimulus bill, is usually approved late in the year and applied retroactively, leaving home buyers anxious about whether they’ll be entitled to the large credit.
This is a dollar-for-dollar credit against your federal income taxes owed (as opposed to a deduction, which would be worth less.) “First Time” buyers, for purposes of this law, are defined as those who purchased a home during the tax year and did not OWN IN DC in the twelve months prior to purchase. So if you owned in Virginia or another state and then bought in DC, you still qualify!
The maximum credit is for $5,000, or $2,500 if married filing separately. The credit begins to phase out when the modified AGI above $70,000 ($110,000 for married filing jointly) and phases out completely at $90,000 ($130,000 married filing jointly).