What is the First Time Home Buyers Tax Credit?
Congress has been blamed for pushing homeownership so much so that in part, they helped our subprime crisis evolve. After all, it’s easy for them to turn a regulatory eye when their constituents are happy and in nice homes. Having said that, in a desperate move to try to get people to buy homes again (this time to rejuvenate the crippled market) they have made law in the recently passed stimulus package an $8,000 tax credit for first time homeowners.
Again, this is a credit not a deduction, which means it is a free $8,000 (if you qualify for the full amount) in your pocket and not a write off on your taxable earnings for the year. Honestly, I’m amazed at this credit and I hope many of you can take advantage of it. Originally, the amount was $7,500 and had to be repaid, which raised many questions if the money should even be accepted by new homeowners. Well, that’s in the past and the future is green (for some of you).
How Do I Claim the First Time Home Buyer Tax Credit?
You will receive the credit when you file either your 2008 or 2009 individual tax return. If you qualify, you will have to fill out Form 5405, which will help them determine the amount you can expect to receive. In case you already filed your return and you qualify for the credit, don’t worry, you can amend your return and still get the credit.
Who Qualifies for the First Time Home Buyer Tax Credit?
First time homebuyers who purchased their house between January 1,2009 and December 1, 2009 are eligible for the credit. But don’t let the title of the credit fool you. If you have not owned a home for three years, you also qualify for the credit. It should have been called the First Time Home Buyer and Three Years Removed From Homeownership Tax Credit.
What are the Income Limits ?
Single taxpayers with incomes up to $75,000 and couples filing together with an income of up to $150,000 can expect to receive the full credit.
How Much of the Credit Will I Receive?
The credit is equal to 10% of the purchase price of the home; of course, it cannot be for over the maximum credit of $8,000.
So, if any of you know anyone who might be able to qualify for this credit, let them know! This is one of the few provisions of the second stimulus package that directly puts money into taxpayer’s pockets. $
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Comments
When you say, if I bought a house this summer, does that mean that you already bought a house during the summer of 2008 or you plan on possibly purchasing a house during the summer of 2009? The implications of this are totally different.
If you already purchased a house summer of 2008, you may be eligible to take the first First Time Home Buyer Tax Credit (FTHBTC) of $7,500 or 10% of the purchase price of your home, whichever is smaller. The first FTHBTC had a clause where you had to repay this amount as an additional tax on your tax return over 15 years. So, in essence, this was a 15 year 0% interest loan that Uncle Sam was offering to you.
If you are planning to purchase a home summer of 2009, you’ll fall under the second FTHBTC where you may be eligible to receive a tax credit of $8,000 or 10% of the purchase price of your home, whichever is smaller. Unlike the first FTHBTC, there is no repayment clause. Uncle Sam is truly giving you $8,000 which would benefit you most by putting it toward the principle of your home mortgage thus decreasing the amount of interest you are going to pay over the life of your mortgage.
Either way, the government is not just going to send you a check because you bought a home. This is a tax credit that you will be able to claim on your tax return. If you usually get a refund, your refund will be up to $8,000 larger. If you usually end up owing taxes, you’d get the difference between what you owe and up to $8,000. (ie you owe $2,000 in taxes and qualify for the full $8,000, you’d get a $6,000 refund.) Of course, if you owe back taxes, child support, bad student loans, and anything else the federal government might withhold your tax refund for, they’d most likely withhold from your refund for that as well.
Make sure you bring paperwork that shows the purchase date and price of your home with you when you visit your tax preparer.
[...] Time Home Buyer Credit. I went over this in a previous post and it’s a provision you should not ignore if you plan on buying a home this summer. The credit [...]
Oh my, what I wouldn’t give to be in that position again. We bought our first home 3.5 years ago with both our names on the mortgage even though my wife is a stay at home mom. I wonder if it would have been possible to get the credit now if she was never on the mortgage loan. I doubt she would be approved for a mortgage loan since she hasn’t had an income for the past 3.5 years.
Ah well, I guess I will need to be satisfied with my additional $12-14 per week in my paycheck.
[...] Time Home Buyer Credit. I went over this in a previous post and it’s a provision you should not ignore if you plan on buying a home this summer. The credit [...]
We claimed the FTHBC for the house we bought summer 2008, so received $7500, plus the reg. tax refund, for a total of $8300. We have to pay $7500 back over the next 15 years. Now, anyone in 2009 WON’T have to pay back $8000. How is that fair? I think that should be amended so it will include 2008-2009, so it won’t have to be paid back for either year. This is just not fair at all.
Not only that, we have a friend that got behind on his child support, for arrears, his kids are grown now and in their higher 20’s, so they offset his tax refund to pay that, INCLUDING the $7500 that he was supposed to get for his new home. That isn’t fair. He was already paying his child support and getting caught up. That $7500 is basically an interest free loan that HAS to be repaid. How can they take a loan and offset it? Now he not only owes his child support, still, but he also has to repay a tax credit that he will never see a dime of! For the next 15 darn years! That is bullsh*t. Our country is totally screwed up!!
Susie – Congressman Ron Paul has actually introduced a piece of legislation that would expand the credit those who will have to pay it back. It’s unclear where the support is for such a bill, if I had to guess, I would say its minimal, but there’s a chance. I understand your frustrations, as does Ben, who too only qualifies for the loan because when the home was purchased. However, I’m also frustrated that I purchased a home in 2007 when there was no credit or no interest loan offered, rather, my present is a rapidly decreasing home value…
Not too sure what you mean…are you just buddies? I think you can but you might want to talk to professional lender. And think of the implications of whether you and your male friend really want to be on a 30 year mortgage.
Please let us know how it goes.
If you buy a home in time to meet the deadline for the credit and your spouse is slightly behind in child support. will the credit go towards arrears or will it go the tax payer?
To the person that wondered if the tax credit would go to pay arrears on child support… The answer is YES. It will go to pay whatever you owe on child support first. You should have received an offset notice before you even filed for your taxes if you have arrears. If you didn’t receive one, you might be in luck.
If you are married and filing jointly… file IRS Form 8379, for Injured Spouse WITH your taxes. That should keep them from keeping all of it if you work and pay in taxes too and are entitled to your part of the credit and refund.
I guess I need someone to explain to me how this gets paid. If I bought a house this summer and then applied for this credit with next year’s taxes, does that mean the government sends me a check for $8,000 (assuming I qualify for the full amount)?