First-time homebuyers: How to get the $8,000 tax credit

WASHINGTON – Feb. 17, 2009 – How does a first-time homebuyer take advantage of the $8,000 tax credit that President Obama is expected to sign into law tomorrow? It comes with a few rules. According to the most recent analysis, the following rules will apply – though things could change as tax professionals weigh the details:

• The deduction is worth 10 percent of a home’s value up to $8,000, which means all homes worth more than $80,000 could qualify for the maximum amount.

• There is an income limit to qualify. A married couples’ modified adjusted gross income (MAGI) should be under $150,000 and single filers’ MAGI should be less than $75,000.

• Partial tax credits may be available for married couples with MAGI incomes over $150,000 but under $170,000, and single filers with incomes over $75,000 but under $95,000.

• If married couples file separately, they can both claim 5 percent of the home purchase ($4,000 each for a home over $80,000) on their tax returns.

• It’s a tax credit, not a deduction. That means the entire amount goes back to the first-time homebuyer unlike deductions, such as mortgage interest, that are subtracted from gross income before tax is calculated. If qualified for $8,000, the buyer gets $8,000, even if they would not owe that much in taxes otherwise.

• The tax credit applies to homes purchased between Jan. 1, 2009, and Dec. 31, 2009..

• The tax credit does not have to be paid back, providing the homebuyer keeps the property for at least 36 months and resides in the home.

• To qualify as a first-time homebuyer, the purchaser cannot have owned a home within the previous three-year period. However, ownership of a vacation home or rental home does not disqualify the buyer.

• If purchasing a new home, the effective date to receive the credit is the first day the homeowner actually lives in the house. If construction began in 2008, that buyer could still qualify. And if construction begins in 2009 but the owner does not take possession until 2010, the buyer would not qualify.

• The tax credit can be claimed on 2008 income tax forms even though the purchase took place in 2009. A buyer could close on a home the same day that President Obama signs it into law, fill out their income tax forms the next day, and receive the tax credit fairly quickly.

The tax credit is not a downpayment, but it could be used toward a downpayment if first-time homebuyers plan ahead.. U.S. taxpayers have money withheld from every paycheck for income taxes. If they owe more tax than the amount deducted, they pay the IRS; if they owe less, they get a tax refund.

By anticipating at least an $8,000 refund in early 2010 when they file 2009 taxes, these buyers could cut down on their tax withholding this year and save the money toward a downpayment. There is one caveat, however: Should they not buy a home in the qualifying period, they would still owe the IRS the money, and reducing their withholding amount could result in a high bill at tax time.



Dora Siler, REALTOR
Coldwell Banker Residential RE
2160 W HWY 434, Suite 100
Longwood, FL 32779
dorasiler@yahoo.com
407-493-4959 cell
407-682-2600 office

Ken is correct on these issues, Adam. I concur with that. If you would like, I can forward a phenomenal spreadsheet outlining the differences between the initial proposal and final bill. One page, short and easy to read. Something concrete you can reference. Contact me if needed.

Hello Adam,

Two corrections to Dora's answer:

"• The tax credit applies to homes purchased between Jan. 1, 2009, and Dec. 31, 2009.. "
CORRECTION: The tax credit applies to purchases made between Jan 1 2009 and Dec 1 2009.


"• The tax credit can be claimed on 2008 income tax forms even though the purchase took place in 2009. A buyer could close on a home the same day that President Obama signs it into law, fill out their income tax forms the next day, and receive the tax credit fairly quickly."
CORRECTION: The tax credit can only be claimed for year of purchase. Buy in 2009, obtain tax credit in 2009.

I'm not a tax expert and I'd strongly recommend you contact one should you have any questions.

Best of luck, Ken Dooley. http://www.kendooley.com/my-blog/

Ah ha!

An answer for you Adam, finally! Attached is a link to the National Association of Realtors recently released fact sheet on the new incentive.

FAQ #19 answers this question best. You can claim it on your 2008 return if you close before the filing deadline of April 15th. You can also file an extension to file later, and claim then. If you did file already, you could file a 1040X (amendment) and get it earlier this way.

This FAQ sheet also answers a ton of questions. Share it with everyone who ask a question about the new program.

Best of Luck

The home is being purchased soon, this year. I'm wondering if I can claim it on my 2008 taxes. The previous stimulus bill ($7500) specifically stated that even if purchased in 2009 during the eligible dates, you could assume it was purchased 12/31/2008 and apply the credit to the 2008 tax return - to help people who have just purchased, or need additional money for a down payment. I haven't seen it explicitly stated for the $8000 credit that this is possible. Has anyone seen anything definitive?

If this can be claimed on the 2008 taxes, I'd think this would be big selling point for sellers and buyers agents... since it's still before tax day, it would be easy for folks to get some additional (and free!) help.

Thanks.

If you purchased in 2008 you are not eligible for the $8000 tax credit, but would be eligible for the $7500 tax break, which unfortunately is essentially a "loan".

Brandi & Justin,

In order to qualify for the 8k credit, you had to occupy a home on or after January 1, 2009 up to before December 1st of 2009. Because you bought and moved into your house last year, you are probably not eligible for the new tax credit. You will definitely need to speak to a tax specialist.

Brandi & Dustin

That is correct for the $7500 credit / loan However, the new stimulus bill signed Tue. ups that amount to $8000, extends the purchase time to Dec 31,2009, and does not need to be paid back. What I have not received oficial word on is whether the $8000 can be claimed for 2008 taxes. There is a lot of speculation and I believe it will be,but at this point I don't believe it is official.

Hi,

I just filed my taxes and I purchased my house 07/15/08. I was asked if I wanted to get the $7,500. tax credit. I was informed by my tax agent that eligible first time home buyers are able to claim this on their 2008/2009 taxes, depends on the year the homebuyer chooses to go with. Please note you only have until July 2009 (this year) to purchase a house a be eligible if you're a first-time homebuyer, etc.

My best advice to you is to call up your tax agent (or any) and they will happily answer your questions specific to your situation.

Hope this helps. Thanks,

Brandi M.

The tax credit now is $8,000 and can be claimed on either your 2008 or 2009 taxes, provided you qualify for it. There are income restrictions, etc which I've outlined in the post below.

http://www.federalhousingtaxcredit.com/2009/faq.php#9


If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?

Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.


For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

THIS TAX CREDIT REPLACES THE 7500 SO IT CAN BE TAKEN ON YOUR 2008 TAXES. IF NOT YOU COULD TAKE 7500 THIS YEAR AND DO 8000 NEXT SO IT CAN BE TAKEN ON 2008.

Just shows you that the experts know as much as joe taxpayer. Half say yes you can get it w/ '08 returns, the other half say you have to wait until you file your '09 return.

No wonder the real estate market is crashing so badly.

Dora, I agree with you on all but one point. I, in addition to selling real estate , do tax preparation on the side. the $7500 dollar credit could be taken on the 2008 return although the purchase did not take place until 2009. To the best of my knowlege at this point you can not do that with the new $8000 credit. I expect that that provision will be forthcoming but I have not been able to find that at the present the $8000 credit can be taken on 08 returns.

I believe that Dora is correct in that this credit can be applied to 2008 taxes, even if the home is purchased in 2009. I believe it is similar to the last credit in that an election can be made to treat the purchase as having occurred on December 31 of the previous year. At least that is what every credible news source I have seen is currently saying.

This is one for your accountant. You have to make sure you qualify for the tax credit as well.

Best of Luck