IRS Tax Credits

Don’t Forget Your Tax Credits

Please don’t make the mistake of not getting your IRS tax credits when you buy a home, because most people do! These tax credits will save you thousands of dollars and you will receive them every year!

Who Qualifies for a Tax Credit?

  • All First-Time Home buyers. Anyone who hasn’t owned a home in the past three years.
  • All Active Duty and Military Veterans . Veterans and active-duty personnel can be first-time home buyers or have owned a home in the past three years.
  • All Non-First Time Home Buyers, Non-Veterans, and Non-Active Duty Home Buyers. Home buyers in this category can still qualify for these tax credits, they just need to purchase a home in a targeted area. There are many targeted areas within Colorado: 24 entire Colorado counties are targeted and another 11 counties contain isolated targeted areas. Contact Command Home Mortgage to ask about the area in which you wish to purchase your home.

What Exactly is a Tax Credit?

A tax credit is the same as cash

Whatever your total federal income taxes are for a year, 100% of your tax credit will be deducted from your total taxes owed. At the end of each year, if you are owed a refund, your refund will be increased by the amount of your tax credit. If you owe the IRS, your tax credit will be deducted from the amount you owe. If your tax credit is larger than your total taxes owed for any single year, you may carry the excess credit forward for up to three tax years.

Don’t Confuse a Tax Credit with a Tax Deduction

Only a fraction of a tax deduction is actually deducted from your tax bill. That fraction is equal to the tax bracket you are in. In most cases you will be in either the 15% or 25% tax bracket when receiving this tax credit.

Examples of the difference between a tax credit and a tax deduction:

If you have a $1,000 tax credit, you can deduct the full $1,000 from your total tax bill.

If you have a $1,000 tax deduction, you can deduct either $150 or $250, depending upon whether you are in the 15% or 25% tax bracket.

How These Tax Credits Work

It’s really quite simple: Every January your mortgage company will send you a statement showing the amount of interest you paid on your mortgage the previous year. You will calculate 20% of that interest amount and that will be your tax credit.  You will fill out IRS form 8369 and add it to your income tax return. That’s it! The best part of this IRS Tax Credit program is you will receive this tax credit every year you own and live in your home.

There are income limits to qualify for a tax credit, but they are generous. Income limits vary by county and household size. In Colorado, annual income limits for one- or two-person households range from $74,100 to $95,100, and for three or more person households, the range is from $85,200 to $111,000. If you have questions, contact Command Home Mortgage about your county.