$8,000 First Time Homebuyer Tax Credit-Update

Mar 10 2009

Published by fishman at 12:15 pm under Becoming a Homeowner, Mortgage Information, Real Estate News Edit This

The $7,500 First-Time Homebuyer Tax Credit created by congress and went into effect on April 9, 2008 and was set to run through July 1, 2009. Many people complained that the credit had to be repaid by the homeowner over a 15 year period and was not really a tax credit, but an additional home loan.

On February 17, 2009 President Barack Obama signed H.R. 1, the “American Recovery and Reinvestment Act of 2009” into law. The act modified the Homebuyer Tax Credit in the following ways:

The repayment requirement has been removed for homes purchased in 2009.

The term of the credit was extended to November 30, 2009 and includes homes purchased after January 1, 2009.

The credit limit has been increased to $8,000.

$8,000 First-Time Homebuyer Credit Details

The new credit is for 10% of the home purchase price, with a maximum credit amount of $8,000. For example, a home purchased for $65,000 would have a credit of $6,500. Homes purchased for $80,000 or more would receive the maximum credit of $8,000. A “Refundable” credit means that if your total tax liability is less than the credit amount the IRS will send you a check for the remainder.

Why Refundability is Important

Many taxpayers’ tax liability is less that $8,000 for the year. According to IRS Tax Tables:

A single filer must have taxable income of at least $46,600 for an $8,000 tax liability.

A married couple filing jointly would need taxable income of at least $58,600 to have $8,000 in tax liability.

First-Time Homebuyers with income less than stated above will usually get a refund from the tax credit.

Who is NOT Allowed to Take the First-time Homebuyer Credit?

You cannot take the credit if any of the following applies to you:

Your income is higher than the “phase out” range. For individuals this means a modified adjusted gross income above $95,000 and over $170,000 for joint filers.

You are purchasing the home from a relative including spouse, parent, child or grandparent.

You stop using the home as your primary residence.

You sell the home within 3 years of purchasing it.

You are a non-resident alien.

Definition of a First-Time Homebuyer

For the purposes of this credit a first-time homebuyer is defined as anyone that has not owned a home in the last three years. For married joint filers, neither filer could have owned a home in the past three years.

Income Limitations

If your income exceeds $75,000 for single filers or $150,000 for married filers, a portion of the credit will be phased out. Single filers with income exceeding $95,000 and married filers with income exceeding $170,000 will receive zero credit.

Qualifications for the Home

The home must be your primary residence. This is generally the home that you live in 50% of the time or more.

The home must be located in the United States.

Vacation homes and rental properties are not eligible for the First-Time Homebuyer Credit.

When purchasing a “New Construction” you must occupy the home prior to December 1, 2009 to receive the credit.

Recapture Provision

If you sell or move out of the home within three years of home ownership the entire tax credit must be repaid to the government.

When Can the First-Time Homebuyer Credit Be Claimed?

The credit may be claimed on your 2008 or 2009 tax return.

The information contained above is deemed accurate at the time of this writing. Tax provisions do change. Contact your tax professional for more information on the $8,000 First-Time Homebuyer Credit.

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