Partial Tax Credit Formula-Exceed the Income Limits & Still Get a Tax Credit

There is a little-known provision in the American Recovery & Reinvestment Act of 2009 that authorizes a PARTIAL TAX CREDIT if a first-time home buyers income EXCEEDS the adjusted gross income (AGI) limit of $75,000 for a single person and $150,000 for a married couple.

Two important things you need to know:

1. “Income” is defined as the Adjusted Gross Income “line” on 1040, 1040A and 1040EZ. Yes, it actually says those words within the line item.

2. The “Partial Tax Credit Income Cap” is $20,000 — and by the way, that’s the dollar basis for the formula we’re about to share with you.

Example: Married Couple’s AGI is $159,000

Subtract Maximum AGI $150,000 For Married Couple = $9,000

Divide $9,000 by $20,000 = .45

Subtract .45 from 1.00 = .55

Multiply .55 x $8000 (max credit) = $4,400

Yes, $4,400 is the tax credit this couple can get–even when their income exceed the so-called maximum income amount. Even at $19,000 over the AGI, this couple could still get a $400 tax credit! Use the exact formula for a single home buyer!

Be sure to check with a tax advisor but as a first-time home buyer, this is awesome incentive to buy a home by December 1, 2009.