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How Do I Qualify For The First Time Buyer $8,000 Tax Credit?

The $8,000 Tax Credit Explained

TAR Governmental Affairs Department Report
Breakdown of $8,000 Tax Credit February 13, 2009

This week Congress passed an economic stimulus package that included an extension and
increase in the previous $7,500 first-time tax credit from last summer to $8,000. There are also
some attractive features of the new version. NAR President Charles McMillan said of the bill:

"Here's our take on the Stimulus Bill and Treasury announcements made this
week. We look at the Stimulus package AND the Treasury's package holistically,
in complement with each other - mostly because that's how the Obama team is
looking at it. Your representatives, the NAR Board of Directors, asked us in
November to do 4 things (with an unspoken but clearly understood mandate to
PRESERVE what we already have). Here they are: 1) get loan limits raised for
high cost areas, 2) make the $7,500 tax credit NOT a loan, 3) try to find ways to
push interest rates down (which are higher than they should be due to systemic
risk right now) by 200 basis points, and 4) help provide solutions to the
foreclosure/short sale problem.

"So here's what we have achieved: 1) the loan limits will be raised to $727,000 in
high cost areas, 2) the tax credit will be raised to $8,000 with NO payback [a true
credit], 3) interest rates have come down 125-150 basis points, and 4) the bill has
over $50 billion in it for foreclosure mitigation, with Geithners' Treasury plan
signaling that the second half of TARP and TALF will be used to mitigate
foreclosures through a government guarantee, drive down interest rates by buying
another $200-300 billion of mortgage paper from the GSEs thereby freeing them
up to do the same with new mortgages, and Fannie has just agreed to lift the cap
of 4 investment properties eligible for loans and raise it to 10."

Specifically the changes from the 2008 $7,500 tax credit are:

Maximum credit amount is increased to $8,000.

An eligible property is any single family residence; including condos, co-ops, or
townhouses that will be used as your principal residence. Investment or second home
properties do not qualify,

It's refundable unlike the former 'credit'. That means you can reduce or eliminate your
income tax liability up to the $8,000 limit for the year of purchase. Any unused amount
can be refunded to you in cash in the year following your qualifying home purchase.
An individual with adjusted gross income of not more than $75,000 or $150,000 on a
joint return are eligible.

Although it's called the "First Time Homebuyer" tax credit, as long as you have not
owned a home in the past 3 years that was your principal residence you probably qualify.

Homebuyers who use state revenue bond financing, in Tennessee that would be the
Tennessee Housing Development Authority (THDA) qualify under the new, $8,000
credit; they did not under the $7,500 program.

The $8,000 is a true credit and does not have to be repaid.

If you sell the house you buy and claim credit for during the 3 years following the
purchase all of the credit is subject to recapture (you have to pay it back).

This program begins January 1,2009 and ends December 1,2009.

Any revisions are effective as of January 1, 2009.

The breakdown from NAR:

FIRST-TIME HOMEBUYER TAX CREDIT

As Modified in the American Recovery and Reinvestment Act
Major Modifications Shaded February 2009

FEATURE

CREDIT AS CREATED JULY 2008

REVISED CREDIT -

APPLIES TO ALL QUALIFIED

EFFECTIVE FOR PURCHASES ON

PURCHASES ON OR AFTER APRIL 9,

OR AFTER JANUARY 1, 2009 AND

2008

BEFORE DECEMBER 1, 2009

Amount of

Lesser of 10 percent of cost of home or

Maximum credit amount

Credit

$7500

increased to $8000

Eligible

Any single family residence (including

No change

Property

condos, co-ops, townhouses) that will

All principal residences eligible.

be used as a principal residence.

Refundable

Yes. Reduces (or can eliminate)

No change

income tax liability for the year of

Purchasers will continue to

purchase. Any unused amount of tax

receive refund for unused amount

credit refunded to purchaser.

when tax return is filed.

Income limit

Yes. Full amount of credit available for

No change

individuals with adjusted gross income

of no more than $75,000 ($150,000 on

Same income limits continue to

a joint return). Phases out above

apply.

those caps ($95,000 and $170,000).

First-time

Yes. Purchaser (and purchaser's

No change

Homebuyer

spouse) may not have owned a

Still available for first-time

Only

principal residence in 3 years previous

purchasers only. Three-year rule

to purchase.

continues to apply.

Revenue Bond

No credit allowed if home financed

Purchasers who utilize revenue

Financing

with state/local bond funding.

bond financing can use credit.

Repayment

Yes. Portion (6.67% of credit or $500)

No repayment for purchases on or

to be repaid each year for 15 years,

after January 1, 2009 and before

starting with 2010 tax filing.

December 1,2009

Recapture

If home sold before is-year repayment

If home is sold within three years

period ends, then outstanding balance

of purchase, entire amount of

of repayment amount recaptured on

credit is recaptured on sale.

sale.

Applies only to homes purchased

in 2009.

Termination

July 1, 2009

December 1,2009

(But note program changes for 2009)

Purchases on or after April 9, 2008 and

All revisions are effective as of

Effective Date

before January 1, 2009. Repayment to

January 1, 2009

begin for 2010 tax year.

Tags: For Buyers, Federal Housing Tax Credit, For Sellers, $8,00 Tax Credit, Federal Housing Tax Credit, first time buyers, American Recovery and Reinvestment Act

$8,000 First Time Homebuyer Tax Credit

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