I have been talking to and hearing lots of people talk about this tax credit for new home buyers and one thing is clear to me – there is a lot of confusion. I think a lot of it stems from the media talking so much about the proposed plans for it that now that the final version of it is approved, the details are different.
Originally, the plan was talking about $15,000, but it was going to be difficult for many to qualify for the whole amount, but the final version is a $8000 credit that most should see in their bank account.
Let me interject that I am not a tax-guy and everything I am writing here is from my own research. So, if I am missing anything, please share it in the comments below.
Who is eligible for the tax credit
- First-time home-buyers (from what I understand buyers who haven’t owned a home in the last 3 years would also qualify as “first-time” buyers)
- Buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers could receive a partial credit.)
Rules to remember
- The purchase of the home must be made between Jan. 1, 2009 and Nov. 30, 2009 (it has now been extended to June 2010).
- The buyers must live in the house for 3 years or more, or they will have to pay back the tax refund.
- The refund amount is $8000 or 10% of the home’s value – whichever one is less.
Tax rebate, refund, credit, deduction?
As Obama’s plan has developed, there have been lots of ideas tossed around from the Senate and the House, but let’s look at the final product. The examples below assume that you qualify for the homebuyer credit from the requirements above.
It is not a tax-deduction.
An example of a tax-deduction would be someone making $50,000 a year would only have to pay taxes on $42,000 ($50K-$8K=$42K). While that is nice, this is a whole lot better for individual taxpayers.
It is a tax credit.
Since it is a tax credit, it will show up a tax refund for most people. For example, if you paid $3000 in taxes this year and after doing your taxes found out that the IRS owed you a $500 refund, you would now get $8500 back.
From what I understand the only way you wouldn’t get at least $8000 back is if after doing your taxes you owed $1000 to the IRS, you would then get a refund check of $7000 ($8000-$1000).
What you need to do to get it
- Buy a house before November 30th, 2009.
- Claim it on your tax return.
According to CNN, there aren’t any special forms to fill out, or any other hoops to jump through to get it. While on a national level, I am not very excited about the excessive spending that our government has been partaking in, but I am planning on taking advantage of this deal. Have you already taken advantage of the homebuyer credit – or do you plan to?
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We’re planning on buying a house by next year! WOOT!
We bought a house 2 years ago
. No free $8,000 for me. Now with the government fronting $8,000 of your home, does that increase the value or decrease the value of your home?
We purchased our home last year a few months before the first version of this came out. It was the perfect timing for us though, because where we live now there wouldn’t be anything available.
Will the $7500 credit from last year still have to be paid back as originally planned or am I off the hook for that money as a part of the new bill?
If you took the previous version of the credit for a purchase on a home in 2008, you will still have to repay it.
There is a form 5405 that is the 2008 version of the credit. While there is no definitive information yet, I would disagree with CNN. There ALWAYS is a form and, in this case, that form is likely going to be a revised version of 5405.
Hey Bob,
I “think” in the state of Missouri that they will actually give you a loan for you to use for your down payment, not sure if thats concrete or something in the works, I read that in the paper online a few weeks ago.
Chris
I think this is great! I purchased my home last year just in time for the $7500 credit. I wish there was a way for the 2008 credit to be ammended and not paid back
.
All in all, the $7500 came in handy this year. I am using some to boost the economy and some in savings.
Apparently the tax credit rules change with each location/situation. Our son and daughter-in-law are looking to upgrade from a one bedroom “cottage” to a larger home before thier first child is born this summer. They qualify for the $8,000 even though they presenlty own their home because the county in which they live was declared a disaster area form last year’s flooding here in Iowa.
So sorry…ignore my typos. :/
You’re not off the hook. If you agreed to the $7,500 plan, that’s the one you have to follow and are not eligible for the $8,000 tax credit. The $7,500 plan is still a good deal though…..an interest-free loan…..better than nothing. Good luck.
No special form to fill-out and it doesn’t have to be paid back like the $7,500 plan.
From http://www.federalhousingtaxcredit.com:
How do I claim the tax credit? Do I need to complete a form or application?
Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
- The form requires you to enter the address of the home you purchased. Does that mean you can’t claim the credit on your 2008 taxes if you plan to buy later this year but have to wait to claim it on your 2009 taxes? I keep finding conflicting things on the web.
we just purchased a home and haven’t purchased one in over 4 yrs. Does this new tax credit mean that we can claim this on our 2008 tax returns?
We are getting our taxes done on Thurs. and would like some answers conflicting answers all over the web. Thanks
Karen
Ok, there is some fuzzy math here. The refund amount is $8000 or 10% of the home’s value – whichever one is less.
That means you would need to buy a $800,000 home to get the full refund?
Who in their right mind would buy an $800,000 house making less than $150K a year for couples, $75K a year for a single person? This kind of thinking has gotten this country into trouble already. People living beyond their means. Now the Government is encouraging it.
Someone correct me if I am wrong here but this sounds like a bad plan.
10 percent of 800,000 is 80,000, so you would need to purchase a home thats at least 80,000 to get the whole 8,000.
Correct Sabrina, yes I am a tart…..
Sabrina,
10% of 800,000 is actually 80,000.
You actually only need to purchase a house that is $80,000 or more to take the full $8000 credit. And as most people know, its hard to find a house under 80k even in this market.
Looks like that’s already been corrected!
I believe you need to close on your house in Dec. of 2009 to qualify for the tax credit.
The fact that your particular situation made you eligible for the tax credit would not have any effect on property values.
Does it matter if you pay it in full? Or do you have to take a loan out?
from what i understand it does not have to be paid back it is free but you do have to pay it back ifyou dont live in the home fro the amount of time stated i read and read on this and i truely believe that it does not have to be paid back
My brother got the 7500$ this year and his house fell thru. What happens if he doesnt purchase and he already got the tax credit? Does he simply pay it back?
can anyone please help me understand a little more about the home loan for first time home buyers? i qualified and everything but im starting to worry now. i owe the irs from child support, now im starting to worry maybe im going to have to file bankrup so soon. i just made the form about a week ago and hoping i might still get it soon.
My wife and I are buying a rental that our son will live in. Is there any legal way to include him in the purchase so that he can claim the rebate?
Fantastic post. Thanks for putting this information together.
Keep up the great work.
Todd
N.A.R. just announced yesterday that the $8,000 can be given at the closing table! That means you can get it NOW for downpayment assistance, closing costs.
Do you have to go thru a bank or con you do a land contract
The 7500 tax credit from 2008 still has to be paid back.
Jan, it is possible that he could apply for the loan but you or your husband could be co-borrower and help him qualify. The buyer has to live in the house for 3 years.
I believe the only way your son could claim the credit would be if you actually place his name on the mortgage or at least the deed. He can’t be the owner if he’s not on the deed but he doesn’t have to actually be on the mortgage note as I understand it. He also can’t claim the credit if he’s listed as a dependent on your 1040 form.
WOW! There is a lot of confusion out there….the $8,000 or 10% of purchase has nothing to do with a mortgage (you can pay cash for your home if you want and still get the tax credit) if you owe back taxes, you owe back taxes….the IRS will take what you owe from the $8,000….it’s a TAX CREDIT. Last year our wonderful politicians called the $7,500 a tax credit as well, yet it is NOT a tax credit, the homeowner will pay $500 a month to the IRS when they do their taxes for the next 15 years (interest free). No reason to pay if back sooner than 15 years since there is no interest. The ruling has very recently changed to using the $8,000 or 10% toward a downpayment….actually, it’s set up like a bridge loan, so the buyer better make sure they will get the money back when they do their taxes because a bridge loan is meant for short-term only. Some of your questions require responses from a tax consultant due to your circumstances…when in doubt, consult your tax advisor!
My dad is helping me buy my first home. My name will not be on the loan, but it will be on the title/deed. I am hoping to use the tax credit for down payment assistance. Can I still qualify for the tax credit?
i want to do the ssame thing
Straight from the horse’s mouth…
http://www.irs.gov/formspubs/article/0,,id=203083,00.html
It suddenly occurred to me to check with the IRS… after reading a thousand other articles and blogs… oh boy!
Well to correct you your math was wrong 10% of $800,000 would be $80,000. $8,000 is 10% of $80,000.
Smart idea, Ms Pixie.
they say the forms are easy. but i guess iam dumb can not figure it out. please help
i purchesed my home in november of 2006. i did not move in until january of 2008. do i quallify for a rebate?
i too want to know if I’m spending 90k cash for a home, do I qualify for the firsttime homebuyers credit?
My husband and I didnt have good enough credit to go to a bank, so we had to buy our home 3 weeks ago, owner financed. All we have is our installment sales contract to prove we are purchasing it. We won’t get a deed until it is paid off. Will we still qualify for the credit? My other question, is if we do the ammended 2008 return, to go ahead and get the money, will the fact that we got $6,000 back already because of my children and that tax credit, affect us getting the full $8,000 back for the home? They only with held $6,000 in taxes from my husbands job last year.
My husband and I are buying our first home in the US. We are living in the US one year and six months with a working visa, for taxes purposes we are residents. We would like to know if we qualify for the first time home buyer tax credit. We are planning to buy it in cash next September or October. Thanks.
I hope they are offering something up for 2010 because I am very anxious to buy a house next year
can i apply for the $8000 tax credit before i have the house i want to buy picked out?
I purchased a condo from Hud and put my name and my sons on the title. My son will be living in the condo. I was only able to put my name on the contract because I was using my funds to purchase it. I already own a home. Will my son be able to qualify for the $8000 rebate or at least half of it?
Can anyone plz tell me or guide me on how to fill out the forms for the $8,000 stimulus for first time home buyer? I have gone to several places to do them but everyone one is charging so much money and I can’t afford that right now! Thank you
Will someone out there educate me? How and where do i go to get the papers to
apply?
I owe child support will the government take my first time home buyer credit?
Gary:
“He also can’t claim the credit if he’s listed as a dependent on your 1040 form.”
Where did you find this out – are you sure?
Anyone:
What would the best way to vest the title if parents where non-occupying co-borrowers for a child – Tenets in Common or Joint Tenancy. I ask because joint Tenancy implies equal distribution which *may* mean our daughter could only claim 1/3 of the 8,000. That coupled with not being able to claim her on our tax return pretty much means no advantage to doing this
One thing is for sure, this this will be a great stimulus for tax advisors..
Bob,
Is there a restriction that you cannot qualify for the $8,000 credit if you are purchasing the home from a family member?
@Tommy
not sure. Sorry!
My husband and I are purchasing a new home. He has owned a home for the past 16 yrs, but I have not. So do I qualify for the credit? My name will be on the new house.
when filing for the 8,000 first time home buyers tax credit do u have to show prove of the purchase with ur taxes.
I am planning on buying my first house this month, I was purchasing a house on contract and was just released from that contract. Am i eligible for the 8,000 tax credit? Thanks
Check out this story about the extension of the housing tax credit:
http://abclocal.go.com/wabc/story?section=news/politics&id=7087955
If you want to skip it, here’s the interesting part (which they do not explain in detail):
1,400,000 homebuyers have taken advantage of the tax credit.
The story specifically states that NAR estimates that 350,000 of those wouldn’t have purchased without the tax credit, meaning 1,050,000 would still have purchased without the tax credit.
This means the total cost of the program breaks down like this:
1,400,000 x 8,000 = $11,200,000,000 (11.2 BILLION)
This means the total cost to give the 350,000 people who wouldn’t have purchased a home without the tax credit was the 11.2 Billion; which means:
11,200,000,000 / 350,000 = $32,000 per transaction
So:
It cost $32,000 for each individual who got the $8,000 tax credit, to motivate them to purchase a new home.
Wow.
I read this on http://www.federalhousingtaxcredit.com/faq1.php#11.
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000.
Does that mean if I purchase a home more than $800,000, will i still qualify for the tax credit?
do you know of or have you heard.can you receive this credit if you used a car accident settlement to buy your house.it is non workable income.so do we get lucky and receive it or do we loose out because it was a settlement?
we bought our house in full this past june without borrowing from a lender. do we still qualify for the 8000 tax credit?
meghan
Hello everyone.Well my husband and I bought our home May 16,2009.We’re eligiable for the tax credit thats the good thing heres the bad.We just filed our taxes(went to H&R Block) found out not only do you have to fill out for an amendment(lots of info to turn in, ex: mortgage statements,ID,Bank statements, and others),after that you have to wait for the government to approve you(which can take up to months at a time).We’re looking for our check to get to us by the summer and issue you the check or deposit it into your account.I hate how the government works sometimes,If that was you owing them 8,000 ,they would get there money NOW!!Instead its you they owe the money to so they can take there time.If anyone knows of getting the money sooner ,please let me know.