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How the $8,000 homebuyer credit works
February 17, 2009
The stimulus debacle awaiting the President's signature expands the "first-time homebuyer" tax credit. A call from a Des Moines Register reporter (for this story) got me to digging into it a bit more. It's a great deal for those who qualify, though there's no way it cures what ails the housing market. Some key points:
- The credit is refundable. That means if you qualify, and the credit you qualify is more than your actual tax for the year, you get the whole credit anyway. If you qualify for an $8,000 credit, your federal income tax before the credit is $2,000, and you had $2,100 tax withheld on your W-2, you will get a refund check $8,100 - all of your withholding, because your net tax is zero, and the $6,000 amount that the credit exceeds tax.
- The credit has to be repaid for over a 15-year period for houses purchased from April 9, 2008 through the end of 2008 -- making it more of an interest-free loan than a tax credit. But for houses purchased in 2009, the credit only has to be repaid if the house is sold, or not used as a principal residence, within 36 months of purchase.
- If you purchase a house in 2009, you can elect to claim the credit on your 2008 1040. If you purchase the house after you file your 2008 1040, you can amend your 2008 return and get your refund that much sooner.
The definition of "first-time homebuyer" is somebody who hasn't owned a house in three years - sort of a renewable virginity.
The credit phases out for adjusted gross incomes over a $20,000 range starting at $75,000 for singles and for $150,000 for joint fliers. The $8,000 credit limit - the lesser of $8,000 or 10% of the house price - applies going back to the original April 2008 effective date. only for houses purchased after 2008, due to a non-code effective date provision (Sec. 1006(f) of the bill).
Link: IRS web site on first-time homebuyer credit (not yet updated for new law).
Related: $15,000 homebuyer credit not in conference bill
UPDATE, 2/25: IRS issues explanation of credit and revised Form 5405.
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Comments
hello i have filed my taxes already, and have purchased a home Feb 2nd 2009 & am able to receive the $7500 repay credit.my question is since i filed "before" the new bill passed then do i still have to pay back the $7500 and if not do i get the $8000 credit? how do i find out?
thank you
ashley
Posted by: ashley | February 17, 2009 3:49 PM
Hi Ashley,
I am by no means a tax accountant, and I am only going based on my research, as I am in the same boat as you. Bought in Jan 09, but filed for the $7500 - which now is $8000. From my reasearch, it seems you will only need to file an amended tax return (1040X) to reflect the additional tax credit as well as the non-repayment as long as the home was purchases AFTER January 1, 2009. HTH.
Posted by: scrubsfan2 | February 18, 2009 9:21 AM
Ashley- I found a provision that now makes me believe the $7,500 limit still applies in 2008. I have made a change to the post as a result. My apologies for the error.
Posted by: Joe Kristan | February 18, 2009 2:18 PM
I bought in 08, why do I have to pay it back.
Posted by: jess | February 18, 2009 7:34 PM
I havn't taken the tax credit yet. What is the difference between you and I. The stimulis was written and signed for both of us . Please explain.
Posted by: jess | February 18, 2009 7:46 PM
Joe,
"within 36 months of purchase" or it has to be the primary residence *for* the first 36 months?
Thanks.
Posted by: Dustin | February 19, 2009 4:11 PM
I bought in 08 though, is the difference the " Bush administration" VS. Obamas stimulus. I bought one month before the 09 home buyers. How is there 09 economic stimulation any different than mine. Do I have to write a letter to my state senetor in hopes that somthing might happen in my favor.
Posted by: jess | February 19, 2009 10:40 PM
I read in an article on CNNMoney.com about this new 8k tax credit. It explains it differently though. It says that if you are supposed to recieve a return on your 2009 taxes of $6,000 (and you qualify for the $8,000 credit) then you still only get a total of $8,000. So if you were supposed to get a return of $2,000 then you will also still only get $8,000. NOT $14,000 or $10,000 respectivly. I read that and now I am thinking that I need to up my exemptions to get less taken out now since I will only get the most back for this year of $8,000.
Am I correct?
I usually get a return of about $6,000.
Posted by: Chris | February 24, 2009 5:39 PM
I am a student in college full-time so i don't work. I found a nice home that i want and it cost $6,000 !!! Do you think I can get the tax credit since 've never owned a home.
Posted by: Tamika | April 2, 2010 11:35 PM