Learn how the $7,500 tax break and $8,000 tax credit works, which one to take based on home purchase date & who qualifies as a first-time home buyer. Details explained.
In a February 25, 2009 press release, the IRS published guidance clarifying issues surrounding the $7,500 and $8,000 first-time home buyer tax credits. Taxpayers now have official guidance and access to updated tax form instructions to help determine if their home purchase qualifies for either credit.
Two U.S. Housing Tax Credit Amounts
Who Qualifies as a First-Time Home Buyer & Home Purchase Date Ranges Defined
Qualifying first-time homebuyers who purchase a home between 1/1/09 and 11/30/09 may claim an $8,000 tax credit that they do not have to pay back as long as the home remains their primary residence for 36 months after purchase.
Taxpayers who purchased a home between 4/9/08 and 12/31/08 are not eligible for the $8,000 non-repayable tax credit; these individuals are only eligible for a $7,500 interest-free loan that must be repaid.
Who is a first-time homebuyer? The IRS describes who qualifies as a first-time homebuyer in the instructions to Form 5405. In short, for purposes of claiming the first-time homebuyer tax credit, a person must 1) purchase a main home on U.S. soil between April 9, 2008 and November 30, 2009 and 2) have not owned another main home for three years prior to the date of purchase.
Understanding the $7,500 Tax Break and $8,000 Tax Credit: A Brief Explanation
The language of the tax law allows for credits of up to $7,500 or $8,000 (depending on the home’s purchase date), but those are maximum amounts. Technically, the rules read that the credit is for 10% of the purchase price up to $7,500 or $8,000, whichever one applies. This effectively means that the credit may only offset up to 10% of the value of a home up to $75,000 or $80,000 in value. Homes worth more than that do not create any additional tax breaks because the maximum credits are $7,500 or $8,000 regardless of purchase price.
Economic Stimulus Plan Negotiations: First $7,500, Then $15,000, Now $8,000
The original first-time homebuyer tax credit rules only allowed for a $7,500 interest-free loan from the government, repayable over a period of 15 years. During 2009 economic stimulus package negotiations, Senator Johhny Isakson proposed and temporarily got a $15,000 housing provision placed in the stimulus package terms. Upon final House and Senate approval, however, the original $7,500 home purchase credit remained with minor changes and a slight enhancement in which certain home purchases made in 2009 would be eligible for an up to $8,000 non-repayable tax credit.
Disclaimer: This article provides an overview of the $7,500 and $8,000 first-time home buyer tax credits and is not a comprehensive source of information or instructions. Further information can be obtained on the IRS website and from the instructions of IRS Form 5405.
Revised IRS Form 5405, First-Time Homebuyer Credit
February 25, 2009 IRS News Release, IR-2009-14
The copyright of the article $7,500 & $8,000 First-Time Homebuyer Tax Credits in Personal Tax Planning is owned by Lena Gott. Permission to republish $7,500 & $8,000 First-Time Homebuyer Tax Credits in print or online must be granted by the author in writing.
Want to learn more about the $8,000 first-time home buyer tax credit,
$7,500 tax break, and the once-discussed $15,000 version? Here is a list of
5 articles on the subject:
I purchased a house at the beginning of February 2009 and filed my taxes
prior to the Stimulus revisions, so I recieved the $7500, how do I recieve
the extra $500?
Mar 6, 2009 8:42 AM
Guest :
No one seems to include an obscure and widely unpublished disqualifying
criteia for the $8000 First Time Home Buyer tax credit and that is, "
...the home can not be purchased from a relative" In February our
daughter bought her first home from my wife and I. Not until she filed
taxes was she made aware of the fact she didn't qualify for the $8000
because she bought the house from her parents. Didn't make any difference
she paid full assessed market value. Can anyone explain the reasoning for
this disqualifier when coporate america gets billions in bailout with no
strings attached?
Mar 6, 2009 9:51 AM
Lena Gott :
Hi Guest on March 6th,
I covered the topic of how purchasing a
home from a relative disqualies you from this credit in another article -
http://personal-tax-planning.suite101.com/article.cfm/irs_form_5405_firstti
me_home_buyer_credit
I'm so sorry to hear that your daughter
didn't realize this until it was too late.
~Lena
Mar 6, 2009 9:56 AM
Guest :
My son bought a house in January, and filed his taxes in Feb and took the
$7500 credit, can he also take the $8000 off his taxes or can he re-file to
get the full $8000 so he will not have to pay back the $7500? Not having
to worry about paying back the $7500 seems like a better deal to me..
Thanks!
Mar 8, 2009 10:17 PM
Guest :
we purchase our house end of november 2008 and started mortgage payment
january of 2009...do we get 2008 tax break or 2009 tax credit?...what is
the difference between repayable & non repayabe tax credit?
Mar 9, 2009 6:20 AM
Lena Gott :
Dear Second Guest on March 6th,
If your son purchased the house
in January 2009 and is otherwise eligible for this credit as a first-time
homebuyer, he qualifies for the $8,000 non-repayable amount. The only way
for him to change what his tax return says is to amend it. Visit the IRS
website for details on how to do this. I would also recommend calling the
IRS to learn exactly how he should go about this. I don't off the top of
my head how this would work if he has already received the first $7,500
credit.
~Lena
Mar 9, 2009 6:23 AM
Lena Gott :
Dear Guest on March 8th,
I need to know a little more about your
situation to give you a definitive answer. Please contact me directly
through my profile (click on my name above to get started).
~Lena
Mar 9, 2009 10:06 AM
Guest :
I purchased a house at the beginning of March 2009 and I already filed my
taxes on February 2009. Can I re-file to get $8000 by this year or I have
to wait until next year (2010)
Mar 9, 2009 6:59 PM
Guest :
My wife and I are purchasing a home this year. I have owned a home within
the last 3 years, but technically my wife has not. Her name was not on our
previous mortgage because we got married after I had purchased the home.
So with one of us owning a home and one of us not, do we qualify for the
credit as a first time home buyer?
Mar 9, 2009 7:49 PM
Guest :
I am closing on our first house March 19th. From what I have read about the
first time home buyer credit, we will qualify for all $8000. I want to take
this credit on my 2008 return, how do I go about doing this? As it stands
right now, we will get a $5400 return just from our regular tax filing.
Does that mean we will get $5400 + $8000 = $13400??? I do our taxes on my
own, what form do I need for this credit? Any help will greatly be
appreciated. Thanks in advance. JW
Mar 11, 2009 12:36 PM
Guest :
I make more than $75,000 but jointly my fiance and I we make less than
$150,000. Do we have to buy a new home after we are married this year to
be eligible for the $8,000? Or can we buy the home before we are married
this year and file jointly next year for the credit? Thank you.
Mar 13, 2009 6:41 AM
Guest :
I just recently bought a home. It is in the process of being built and will
be closing in June 2009. Can I claim the $8000 credit on my 2008 tax credit
(by April 15th), since I already know almost everything including the cost
of the home?
Mar 15, 2009 12:50 PM
Guest :
I am in the process of purchasing a house. Closing to be sometime in April.
I am a first time homebuyer. I am also planning to get married mid
September. My Fiance is not a first time homebuyer. If I purchase the
home before we are married, do I qualify for the credit?
Mar 16, 2009 6:12 AM
Guest :
My first time home buying closing date is 30th Dec 2008, but I started my
actual mortgage repayment starting from Feb 1st 2009. Do I qualify for
$8000 credit? Please let me know.
Mar 17, 2009 9:42 AM
Guest :
My father bought a mobile home 29 years ago and it has been paid off for 12
years. The mobile home is in a trailer park with he has to pay lot rent. So
I was wondering that sense he does not own the land and does not pay
property taxes on it would he qualifiy for this tax credit?
Mar 18, 2009 11:07 AM
Guest :
I qualify for the $7500 home buyer credit on all counts except for income
in 2008 - due to a bonus and taking 401K money. Can I wait an claim my tax
credit against my 2009 taxes because my income will be much smaller?
Mar 20, 2009 2:38 PM
Guest :
i bought my house in feb of 09 and i wanted to know if i can receive the
money of 8000 now or do i have to wait till my 09 tax filing? thanks
Mar 26, 2009 4:29 AM
Guest :
We've purchased a home, but we dont go to settlement until May 1st. Should
we ask for an extension for our taxes until after settlement so we can get
the tax credit, or is there another way of going about it? Thank
you!
Mar 27, 2009 9:03 AM
Guest :
I have the same question as quest from March 8, 2009. I purchased my home
November 22, 2008. But, I made my first payment January 1, 2009. I did
recieve the $7500 tax credit. Am I eligable to recieve the $8000 and
utilize that to repay the $7500? Hence yielding an extra $500 on my 2009
returns.
Mar 29, 2009 12:27 PM
Guest :
I am putting an offer on a house, and will qualify for the $8000 first time
home buyers tax credit. How can I reduce my tax withheld so I can take
advantage of this credit now to go towards a down payment? Will i only see
a small increase in each check this way? I'm hoping to negotiate a closing
date in 60 days. Thanks in advance for any assistance.
Apr 6, 2009 10:19 AM
Guest :
I own a house (bought in March 08, just a month before the $7500 credit).
My fiance has never owned a house. If I sell it to him this year, he would
qualify for the $8000 credit. But when we get married later this year,
would that disqualify him as a first time home buyer b/c I had owned a
home? I realize this is kinda' trying to cheat the system, I'm really just
curious about it more than anything. It would be too much of a hassle for
just $8k.
Apr 20, 2009 4:56 PM
Guest :
Is the $8,000 credit applies only to first-time homebuyers? Also, is the
$8,000 credit applies to single-family residence only?
May 6, 2009 5:14 PM
Guest :
On the cannot buy from "Relative" problem... Has there been ANY
creative suggestions on how parents can sell 2nd home to son - He has been
living in the house for 3years while in college, he should have the right
to be the 'first-time-buyer' and receive the credit without being penalized
for being a 'relative'.
May 26, 2009 2:57 PM
Guest :
I bough a house in Oct. of 2008...so there for we get the 7500 tax
loan....BUT we bough a HUD home is there a tax credit for that? Will the
$7500 go twards our taxes or will we get it?
May 30, 2009 2:36 PM
Guest :
Lena can you clear something up for me. I have been told by a friend that
this is an $8000 tax credit i.e. lowers my taxable net income by $8000
which would only increase my return by maybe $1000 dollars. Is this
considered a tax credit or is this an actually extra $8000 in hard cash
that we can spend to update the house after we get it?
Jun 8, 2009 6:34 PM
Guest :
Guest32 We purchase our house end of March 26, 2008 and started
mortgage payment May of 2009...do we get 2008 tax break or 2009 tax
credit?...what is the difference between repayable & non repayabe tax
credit?
Jun 12, 2009 11:45 AM
Guest :
I bought a house June 2, 2009 I heard you can get an amendement and get the
$8,000 now instead if waiting till next year is this true? Also what is
the minimum amount to purchase a house to get the $8,000 credit? I hear
it's $80,000 just need to confirm.
Jul 10, 2009 12:29 PM
Guest :
Our first time buyers are only qualified with one parent as a co signer.
This parent has to be on title as well. Do the first time buyers still
qualify for the $8000 credit?
Aug 4, 2009 9:27 PM
Guest :
My daughter is buying a lot from my husband then constructing her own home.
Would she be able to get the tax credit in that she is not actually buying
a home from him, just the lot to build it on.
Sep 24, 2009 1:35 PM
Guest :
I bought a house in July 2008. I am getting married and we might be
selling the house. There is a chance that we will make a few thousand
dollars on it or break even. If we make, say $3000 after commissions and
closing cost, does all that go to the government since I got the full
$7500? Is there a 'calculator' for how much you have to pay back? Am I
correct that if you take a loss or break even then you do not have to pay
anything?
Oct 7, 2009 10:39 AM
Guest :
I am a first time home buyer. My father is a co-signer on the mortgage. Am
i still eligible for the $ 8,000.00 tax credit even though his name is on
the mortgage? Im the primary buyer. I make under $75,000 a year. I believe
he makes over $100,000 yearly. Am If not $8,000 am i eligible for $4,000?
Oct 16, 2009 9:50 AM
Guest :
Why do the first time home buyers of 2008 have to pay back the loan and the
first time home buyers of 2009 don't? And is it smart to even take the
loan if you are just going to have to pay it back? And of what does the
process of paying the loan back consist? email:
joselangeles@hotmail.com
Feb 26, 2009
