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$8,000 Homebuyer Tax Credit

Written by Nickel - 429 Comments

Update: I’ve posted additional details surrounding this credit and how to claim it. Please click through to read: How to Claim the First-Time Homebuyer Tax Credit.


Okay, details regarding the House/Senate compromise on the economic stimulus package are starting to come out. As I noted yesterday, the Senate’s $15,000 homebuyer tax credit has been stripped from the final version. In it’s place is an $8,000 tax credit for first-time homebuyers. Note that this credit does not need to be paid back, unlike the original $7,500 first-time homebuyer tax credit. To qualify, the purchase has to be made between January 1st, 2009 and before November 30th, 2009 and you have to stay in your home for three years. This is a refundable tax credit, and it’s phased out for individuals with AGI of $75k or higher or couples with AGI of $150k or higher.


Published on February 12th, 2009
Modified on December 18th, 2009 - 429 Comments
Filed under: Economy, Taxes

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429 Responses to “$8,000 Homebuyer Tax Credit”

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  1. 1
    chrisss Says:

    this doesn’t go into effect until the president signs the bill, right? Also anyone know when that may happen?

  2. 2
    Brandon Says:

    Is it refundable?

    Edit: I would guess it would have to be if it is similar to the first one. To have owed $8000 in taxes, you would have to have a pretty impressive AGI.

  3. 3
    thomas Says:

    total and complete horse squeeze. This is only going to encourage BAD home purchases or people to buy a second home who are not necessarily impacted by the current economic conditions.

    I envision more home sellers sitting on properties and working with agents to use the $8k free money as a bargaining chip.

    I also think it’s crap they aren’t grandfathering in the $7500 from last year. Those homes were bought in a recession too ya know.

  4. 4
    N. Avery Says:

    I am also curious if it is refundable.

    I agree that it is diametrically opposed to my political paradigm. I think it is a bad decision that will encourage more bad decisions. I also think it will make sellers less likely to bargain.

    That said, I close on my first home in March – I hope my timing was right!

  5. 5
    philip Says:

    “I also think it’s crap they aren’t grandfathering in the $7500 from last year. Those homes were bought in a recession too ya know.”

    What about homes that were purchased between Jan-April, they were purchased in the same time period also? Why not just give everyone that asks nicely $10,000 to make them happy.

    Why should my tax dollars, and future tax I pay go to helping these people furnish their houses after they buy them, nobody helped me out.

    Why does it seem so many people feel the entitlement to this money for buying a house? It seems like they should do the same as others and pay for it with the money they earn over time.

    I am also wondering how many people don’t realize that the money they get back in a tax refund is not because they owed no taxes, but that they paid too much in taxes, I didn’t realize this was so mis-understood by people. I paid close to $11,000 through paycheck deduction, but my taxes that I needed to pay was only close to $9,500 so I got a refund of about $1,500, that still means that I paid $9,500 in taxes this year even though I got money back from the government. If I were to get this I would have $9,500 paid and would get up the $8,000 without an issue, I suspect most people commenting are paying some taxes and just not looking at the numbers correctly.

  6. 6
    JD Says:

    Your household income also has to be relatively low, I think its under $150k to be eligible for the full credit.

  7. 7
    Austin Says:

    Unused tax credits usually roll over, so even if your tax liability won’t be >$8k this year, you should be able to roll any unused credit forward to the next year. Generally this can only be done for a couple of years.

    While this little “stimulus” does tempt me to buy a house, we will not be financially ready to do so anytime this year. I don’t really like the idea of being locked in for 3 years either.

  8. 8
    David Says:

    So what does this mean for me who purchased my first home in May of 2008?

    Am I still eligible for the $7500 “loan”? If so, do I need to file before the new bill goes into law?

  9. 9
    Mary Says:

    One of the things I find most frustrating (and there are a hundred things I find frustrating about this ridiculous pork bill) is that all the so-called ‘tax breaks’ are going to people who are not the high producers of our society, and who have helped cause this mess with their bad fiscal decisions. Meanwhile, as homeschooling parents of three kids, who live within our means, and small business owners, none of these breaks will be coming at me and my husband at all. In fact, the Bush tax cuts will probably be done away with by this administration and legislature. I see more bad behaviour being rewarded, and more ingenuity and hard work being quashed and penalized. Anyone else out there feel Atlas shrugging?

  10. 10
    Dustin Says:

    We are closing on our home in April and this seems to be great news. Of course bearing it actually gets through to the President’s desk.

    This credit is obviously going to make a lot of people mad, but it will help a lot of people and the economy. The money we get will be going right back into the economy in ways of furniture, appliances, and a patio. The exact goal of this credit.

  11. 11
    Heidi Says:

    I have to agree with Dustin the credit will be used to furnish/add to/or repair the home more than likely, so it will be going back to the economy.

    I’m sure those who did buy a home a few years back got deals like $0 down but NOW you have to have at LEAST 3.5% for a downpayment + closing. It’s not a buyers market, sellers will take advantage of the 7500 or 8000 credit and make it harder for a buyer because they’re expected to come up with 3.5% AND ALL of closing….on a 150k home that is 14,250 at closing!

    The whole point of this is to jump start the economy. I think most homebuyers will use it for that purpose.

  12. 12
    nickel Says:

    Heidi: Are you serious? It’s not a buyer’s market? Supply has been far outstripped demand. That’s the very definition of a buyer’s market, and exactly why housing prices have collapsed. If the seller’s are in the driver’s seat, then why aren’t houses selling?

  13. 13
    Heidi Says:

    what i meant by that is first time homebuyers who are now considering buying a home have to come out of pocket more than say someone who didn’t have to come up with a downpymt or a signicant amt for closing (up to 6% of the purch price). the tx market has not been affected by it as much as cali, az and fl but my example is pretty accurate. the 7500/8000 is a great incentive but NOT EVERYBODY has 15k to bring to the table especially in these tough times.

  14. 14
    nickel Says:

    In my (possibly unpopular) opinion, if people can’t come to the table with 10-20% of the purchase price in the form of a downpayment, then they shouldn’t be buying a house. That’s what got us into trouble in the first place. Also keep in mind that this is a tax credit, so the money won’t be available at the time of the purchase. You’ll have to wait until you file to get your hands on it.

  15. 15
    Dustin Says:

    nickel,
    I know you will have to wait until purchase to receive the credit, but won’t you be able to go back and amend your 2008 return to get it sooner?

  16. 16
    Hailey Says:

    I bought my house May 2008 and if I understand this correctly I will have to pay the 7,500 credit back but new buyers this year get 8,000 and do not have to pay back. That just doesn’t seem right

  17. 17
    Brandon Says:

    Hailey: People who bought in January 2008 got nothing… is that fair?

  18. 18
    nickel Says:

    Hailey: You knew the deal when you bought. Is it fair that we bought our house before this whole mess started and got nothing? Nope. But this isn’t about fair. This is about spending money to stimulate the housing market going forward. They’re dangling a carrot in front of would-be buyers. You already bought, so what sense does it make to sweeten the deal for you?

  19. 19
    Heidi Says:

    Yes I understand that and I agree with you on the fact that people who cannot afford it should not even consider buying a home in the first place. Why people commit to something they cannot afford is beyond me but you know as well as I do that many are looking at the refund, that yes comes after you file, as something that is going to entice them to buy whether they can afford it or not for the long term.

  20. 20
    Michael Says:

    I’m not so sure that buyers who purchased in 2008 will be paying back the credit. As I have read it, the current bill is being amended. This is not a new bill. That being the case, the original dates (April ‘08 through June ‘09) may hold true for the purpose of determining the payback provision. We’ll find out soon enough, but I’m not convinced that it won’t apply.

  21. 21
    Jennifer Says:

    Can someone tell me where to find the information please? All I can find are a couple of sentences on it.

  22. 22
    Rebecca Says:

    I have tried to find the answer to this whole tax credit business but to no avail, so I’m hoping someone can answer this question for me.
    In regards to the new information of an $8000.00 tax credit, I’m looking for clarity on what I think this means to me – a potential 1st time home buyer

    A. Is this an amount we will get back in next years taxes if we purchase a home?

    B Is this an amount we can deduct off our taxable income to put us in a lower tax bracket?

    C. Is this money we can deduct off our federal tax amount if we have to pay in to the government on our taxes next year so, for instance, if we owe 10,000 then we only pay in 2,000?

    D. Is the amount of refund based on how much was withheld and if less than 8,000 was withheld then, how much money would we receive?

  23. 23
    Michael Says:

    In regards to Nickel’s comment earlier, the new provisions in this amendment allow the credit to be amortized from the point of closing, meaning that the money will be available to the buyer at or around closing.

    Rebecca:

    a) While it’s still up in the air, the new credit would allow you to either amortize the credit and make it available at the time of purchase, or else you could take the credit on your 2010 return.

    b) This is not a tax deduction, it is a credit. It has no bearing on your tax bracket.

    c) If it holds fundamentally to the credit from 2008, then yes, it can be used to offset federal tax liability.

    d) The credit is not based on your total withholding. It is based on your total income and the purchase price of your home.

    Hope this helps.

  24. 24
    Derek Says:

    Rebecca,

    This is how I understand it, however since the bill is not officially out, this is just my opinion

    A. You should be able to claim on this year’s tax return if you purchase before taxes are due. Another option i heard is if you are really planning to buy a house and do not need your tax return right away, you can file for an extension on your 2009 taxes, purchases a house during that time, and then claim the credit. If you don’t buy before the tax deadline, then yes, it will be on your 2010 claim.

    B. Don’t think so. It will be a refundable tax credit meaning after the bottom line is drawn (either you owe or are getting a refund) a full $8,000 credit will be added to that number. IE 1 (your getting a refund of 500 from your tax return, you would get $8,500) IE2 (you owe the government $500, you would get $7,500)

    C. Yes see above

    D. Not sure about D

  25. 25
    Lauren Says:

    I think that some of you are getting judgmental and jumping to conclusions: I agree that those who are purely basing their home buying decisions on this tax credit should not be buying in the first place. However, I disagree with your assertion that “if people can’t come to the table with 10-20% of the purchase price in the form of a downpayment, then they shouldn’t be buying a house and that’s what got us into trouble in the first place.” It’s just not possible anymore to put less than 20% down on a house or condo in many nicer urban areas. This is because now, along with avoiding PMI, there is the added issue of getting below the $417,000 conforming limit. The difference between conforming rates and Jumbo rates used to be small. The jumbo rate is now more than 2 1/2% higher than the conforming rate. That’s crazy! Worse than that, if the home costs more than 520K, the buyer has to put down more than 20% so that the mortgage remains less than $417,000 to avoid the Jumbo interest rate. 99.9 % of these buyers would have no problem making normal payments for the higher amount at the conforming mortgage rate or even for a slightly higher Jumbo rate. But now, along with avoiding PMI, there is now the added issue of getting enough cash to get your mortgage below the $417,000 conforming limit. Just because it’s not easy for the buyers to find all of that cash, does not mean that the home is beyond the buyer’s means. The $8,000 rebate would be a nice little bonus, even a year after scrounging together so much cash.

  26. 26
    Rebecca Says:

    I really appreciate the feedback!

  27. 27
    Michael A Says:

    One positive to the market staying down for a prolonged period of time is that people who recognize the opportunity to buy have had an extended period of time to prepare for purchase. I know several individuals and couples that have been casually looking for months – meanwhile saving money. They haven’t had any huge incentive to buy as they just keep watching prices plummet. I think this tax credit could get a lot of them off of the sideline. One concern I have – will this credit create a real bottom to the market or a false bottom? When the credit expires, will prices/values just drop more?

  28. 28
    Sam Says:

    In the USA Today paper and website it doesn’t state that the tax credit is just for first time home buyers it just says it’s been reduced from 15,000 to 8,000 for home buyers of new and exisiting homes. I know other news sites are saying just for first time home buyers. Whats the truth and does anyone really know?

  29. 29
    Jennie Says:

    Here’s what CNN is reporting right now…

    Temporary credit for home buyers: The bill increases the size of an existing temporary and refundable first-time home buyer credit to $8,000, up from $7,500. It also removes the requirement under current law that the credit be paid back if the buyer stays in the home for at least three years. And it would extend the credit’s expiration date to Dec. 1, 2009, from July 1. Those eligible for this credit must have purchased a home after Jan. 1, 2009, and before Dec. 1, 2009.

    The full credit is available to those making $75,000 or less ($150,000 for joint filers). Estimated cost: $6.6 billion.

  30. 30
    Chris Says:

    I just bought my house Jan. 30th 09 and right after I did my taxes inorder to recieve the $7,500, so I can rehab my house a little. So now that I have filed does anyone know if I am able to get the other $8,000 even though I recieved the $7,500 already? Thanks!

  31. 31
    Susan Says:

    Caveat – I am not an accountant…

    David’s question as to whether his tax credit from last year’s purchase is still available – I believe it is. My tax accountant is telling me that people have not been taking the credit because it has to be repaid, but that may change depending on how this legislation reads when it’s all complete and signed, rumor says that not needing repayment might be backdated. If someone declined it initially in their 2008 taxes, they could still amend that return and claim it.

  32. 32
    Tammy Says:

    We purchased April 15, 2008 – we qualify for the $7500 and are planning to sign and efile with our accountant tomorrow. Does anyone understand if the April 9, 2008 date still stands or is there a chance I will get this credit taken away with the way they plan to ammend? Should I still file to tomorrow or wait? Does it matter since I can ammend the return?

  33. 33
    mike Says:

    Tammy,

    The April 9, 2008 date stands and you won’t get your credit taken away. The way the credit reads now, you are not eligible for the $8M credit becuase you bought before 1-1-09.

    Go ahread and file IMHO. You can always ammend.

    As far as this being a “stimulus” as nickel claims for housing, the most this will do is perhaps get excess housing reduced and improve builders’ liquidity; it will not stimulate a new construction recovery becuase there is nothing in this bill that stimulates job creation based on value creation. Where is the incentive to build a better mousetrap?

    Housing is not a driver of the economy but rather a reflection of value/wealth creation. A $13 per week increase in take home for most people is not going to do anything to create value and hence jobs.

    I can solve the housing demand problem in about 10 seconds. Let me bring in a couple 100,000 educated Chinesse and Indians that have some $$$$$$$$$ $$cash. They will start businesses, create value, and bingo, problem solved. You won’t be able to build homes fast enough.

  34. 34
    Vanessa Hens Says:

    Could someone please clarify that if my husband has never owned a house before and I have. Do we get half the tax credit or nothing at all? Since my husband has 50% joint ownership of the new home we will close on, would we quailfy for half the tax right off or nothing at all. WE are closing on our house on March 13, 2009. Please advise someone.

    Thank you,

    Vanessa

  35. 35
    mike Says:

    Vanessa

    If the original wording of the $7,500 credit still applies, which I think it still does, you are out of luck if either one of you owned a home within the past three years.

    You don’t have the prorata abiltiy to claim only part of the credit either. IMHO you should, but what can you do?

  36. 36
    Terry Says:

    Doublechecking: If I purchased a home in September 2008, I will be eligible for the $7500 (which will have to be repaid) – they are not going to take this away after they sign the new bill?

  37. 37
    Bryan Says:

    I have a quick question about the concept of “you have to stay in your home for three years.” My wife and I are considering purchasing the house we are now renting. This credit is an obvious incentive, but we may have to move in 2 years for education reasons. We are planning on renting out the house after living in the house for those 2 years. Does anyone know if “staying in your home” might refer to simply owning the property, or actually living in it? I know, asking about the minutia even before bill is signed is a little presumptive, but I thought it couldn’t hurt to ask. Thanks for the help!

  38. 38
    Susan Says:

    The tax credit for purchases in 2008 is still there, typically anything in current tax law is grandfathered. What I’m not sure about is whether the new bill raises the total to $8,000 and removes the payback provision all the way back to April of 2008 or just for purchases starting this year.

  39. 39
    Susan Says:

    Bryan – worst case scenario you’d probably have to pay back a pro-rated portion of the credit out of your proceeds at the time of sale.

    People who buy HUD homes for half price under the “good neighbor” program are also required to stay for three years. If they sell early, they have a pro rated penalty. I’m making an assumption that this would be treated in a similar fashion.

  40. 40
    Steve Says:

    I’m in Terry’s boat, does anyone know what happens to the tax credit to us (purchased in Sept 08)? Do we still quaify for anything, and if so, what? I awoke hungover (watched my cards lose to Notre Dame last night) to my girlfriend calling me and telling me I wouldn’t. I have already filed but awaiting my refund. I think it’s poop anyway considering between all the taxes I got taken for ($18384.40) last year! Ron Paul wouldn’t have let this happen!

  41. 41
    philip Says:

    @ Steve,

    based on purchase date you should still get the $7,500 credit, not certain on having to pay pack over time. However if you paid 18k in taxes and are filing single it sounds like you may be well above the income limits for claiming this. You should check those numbers as well to make sure you have it filed correctly.

  42. 42
    Steve Says:

    Thanks Philip,
    What I ment was every single penny the government takes from me i.e. Social security that I’ll never see, or Medicade I’ll never benefit from, federal, state and LOCAL taxes. I’m 29 years old, single, make $65M a year and HAD to buy a house to stop the government from robbing all my hard work

  43. 43
    philip Says:

    Ok, if it is all your taxes including social and medicare then yea, that number makes way more sense. I am close to the same numbers and unfortunatly I purchased my house in January so I get nothing out of any of this, but at least I know I can handle it all on my own.

  44. 44
    Paul Says:

    Does anyone now if this credit applies to first time home builders if you move in between 1/1 and 8/31 as I know last years “loan” applied to first time home builders based on move in date?

  45. 45
    Vanessa Says:

    Thanks Mike! You are the best!

    Vanessa,

  46. 46
    Joe Says:

    My fiance and I bought a home in September 08 and have not filed yet. We are both first time home buyers and are wondering how we file for the credit. Since we are not married yet we have to file individually. Does just one of us file as the first time home buyer? Do we each file for it and get half of the credit?

    It would also be great to know about the repayment requirements of those who purchased under last year’s plan, but I understand no one is too sure of this yet.

    Thanks!

  47. 47
    Arlista Says:

    Did the dates change to early 2008

  48. 48
    Dave Says:

    Earning less than 150k for the household is relatively low? What fantasy world are you living in?

    Why do people feel entitlement to this money? I am all for hard work, but do you know how many people were stiffed out of houses b/c of predatory lendors…and yes, people were ignorant to accept the loans that shot up and forced them to give up their homes. These people just didnt have the knowledge, proper education. What does that say about our school systems? The bones of this country now have osteoperosis and if test scores prove anything…I dont see great future

  49. 49
    Johhny Says:

    We know original $7,500 “loan” was for a first time buyer purchasing in 2008 and no later than 7/1/2009. Those who bought in 2009 before 7/1 can claim the credit on their 2008 taxes. The new stimuls package is said to include an $8,000 credit for those who purchased 1/1/09 – 12/1/2009. The latter does not need to be repaid.
    Assuming there are no changes and president signs stimulus bill next week as expected. What happens if you close on a date that qualifies you for both, say on 2/27/09? Does the new credit replace the existing or can you claim the $7,500 “loan” on 2008 taxes and the 8,000 credit on 2009 taxes? If not can we claim the $8,000 credit on 2008 tax returns?

  50. 50
    Dave Says:

    I have read all the responses and I think I got my answer. Basically Im concerned if I will benefit fromt he $7500 taxc credit since I bought my house in November of 08. The new agreement the released and are about to sign says the house must be purchased between Jan and dec of 09. This tells me that the bill before has changed, I know it still may be early but does anyone know for sure if we can stillapply for this?

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