Home Buyer’s Tax Credit

The economic stimulus package has been signed; it includes a gift for first time homebuyers– $8,000 (or 10% of the home’s value, whichever is less) on their 2008 or 2009 taxes. In a nutshell:

• Refundable: The credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of withholding they paid during the year- was less than that amount.

• Purchase Date: To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house as their primary residence for at least three years, or they will be obligated to pay back the credit.

• Paperwork: Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.

• Income Restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Frequently Asked Questions

Q: How much is the credit?

A: The tax credit would be $8,000 or 10% of the purchase price, whichever is less.

Q: What type of purchase is eligible?

A: Similar to the $7,500 tax credit included in the Housing and Economic Recovery Act of 2008, the $8,000 tax credit included in the 2009 economic stimulus plan is available for the purchase of a principal residence by first-time homebuyers.

Q: Who qualifies for the first-time homebuyer credit?

A: According to the IRS, any taxpayer who has not owned a home during the 3 years prior to the date of purchase can qualify for the credit.

Q: Do I have to repay the credit?

A: No. This is a change from the previous $7,500 tax credit. However, if the home is sold within three years of purchase, the credit will be reversed.

Q: Are there income limitations on the tax credit?

A: The tax credit begins to phase out for individuals with adjusted gross income over $75,000 ($150,000 for joint filers).