Get an $8,000 Federal Tax Credit … NOW!
Wednesday, February 18th, 2009
The new Stimulus Bill provides for an $8,000 Federal Tax Credit! Are you eligible?
President Barak Obama signed into law yesterday H.R. 1, The American Recovery and Reinvestment Act of 2009. As part of the new law, first time home buyers will be provided up to an $8,000 tax credit. The credit will be available to those home purchasers that close escrow on a home between January 1, 2009 and December 1, 2009.
This is a true credit, refundable to those taxpayers that have less than $8,000 in tax liability. That means the IRS will give you $8,000 to help pay your taxes in 2009, for buying a home in 2009. If you owe the IRS $9,000 for your 2009 taxes, you will only have to send them $1,000. If you owe the IRS $2,000 for your 2009 taxes, the IRS will send you $6,000, if you buy a home in 2009. What a great deal! There are some restrictions that home buyers should be aware of:
1. The credit can not be used as part of your down payment and you still have to qualify for a loan.
2. There are income limitations for the purchasers, $75,000 for an individual or $150,000 for a couple. Partial credits may be available if you exceed the maximum income limits.
3. The Tax credit is for 10% of the home’s value, up to $8,000. And, it may be used to buy a new, resale or foreclosed home.
4. You must be a first time home buyer. By definition, this means you (and your spouse, if buying jointly) must not have been a home owner for the past 3 years.
There are other provisions in the American Recovery and Investment Act of 2009 that home buyers might want to be aware of:
1. The new law extends the higher Fannie Mae and Freddie Mac conforming loan rates from 2008 thru December 31, 2009, check with your lender for specifics of loan limits in your area.
2. Extends tax credits for energy efficiency home improvements.
3. Provides a “patch” for the Alternative Minimum Tax rules for 2009.
More information will become available over the next couple of weeks. Watch this blog for future updates. Until then, good luck and good shopping for that new home!
This is all very interesting that we are now finding out about all the “conditions” of qualifying for this tax credit. Never heard about the income limitations…or the 10% of the home’s value up to $8000. In California, it would be difficult to qualify for a loan if your income was less than $75,000.
I’d say this “stimulus” is false advertising!
Buyer beware – and if it sounds too good to be true, it probably is.
Hi Debbie,
Yes, there are some special conditions for the Federal Tax Credit, but there are also some additional benefits. You should consult your tax consultant for the specifics as they apply to your individual situation.
The biggest benefit to the Federal Tax Credit is that it is refundable. That means, even if you have less than $8,000 of income tax liability, the Federal Government will recognize the entire $8,000 credit and send you a check for the difference. So, if you owe $5,000 of taxes to the Federal Government and are eligible for the full $8,000 credit, the government will send you $3,000.
For the State of California Tax Credit, there are no income limitations, nor are there any first time home buyer limitations. But, the tax credit is spread over three years and if you do not owe $3,333 of state income tax, your credit in any of the three years is limited to the amount of tax you owe.
Each Tax Credit plan is different. I try to spell out the differences in my other posts on these issues. Please refer to my other posts for more details and talk with your tax professional about your personal circumstances.
I believe this offer is not “too good to be true”, it just comes with some strings that you need to understand, before you make a decision to purchase, based on the receipt of a tax credit.
Please let me know if I can answer any other questions,
Steve
If I got the $7500 tax credit, can I apply for the $8000 tax credit as well on top of the $7500 tax credit.
Daniel,
If you bought your home between April 4, 2008 and January 1, 2009, you can apply for the difference between the credits you would have received. Check with your tax consultant for specifics to your case.
Steve
We have not purchased our first home yet but will in the next couple of months. If the credit is claimed on our 2008 returns will we have to repay the $8,000 back? Also, when is the latest you can claim the tax credit on your 2008 returns?
We are purchasing a new home in early June and we purchased our first home ten years ago. I’ve been told that since we have not made any new purchases since then, we could qualify for the 8K credit. Is that true? Also, if we already did our taxes, can you still claim it for this year?
I have an investment prop. that was bought more than 3 years ago and have been living in an apt. Do I qualify as first time home buyer?
Hi. I would like to advance $88,000 to my over 40 son who is interested in buying a
45% interest in a 2 bedroom condo that he shares with and pays rent to the owner. There would be no commercial mortgage. The owner would use the
money to pay off his mortgage. The owner has a $112000 equity in the $200000 condo.
My son has never owned any previous residence.
Claudia,
If you purchased your first home 10 years ago, then the question is have you owned the home for the last 10 years? The “First Time Homebuyer” qualification is defined as a new owner of a home, who has not owned a home in the last three years. If you have had continued ownership of the first home you purchased, then you may not qualify.
As to the tax filing question, you claim the Tax Credit on the tax return for the year in which you purchased the home. Since you are planning to purchase the home in 2009, you would claim the credit on your 2009 tax return.
Steve
Maybe I should have stated my question differently. Is a equity buy in a home with a private non-commerial mortgage
eligible for the stimulus payment The
equity would be recorded
The equity buyer is presently renting a portion of the condo.
Jay and Maria,
If you have not yet purchased your home, but will purchase the home before December 1, 2009, you will apply for the tax credit on your 2009 income taxes. You can not apply for the tax credit on your 2008 tax return if you did not purchase the home prior to December 31, 2008.
Please let me know if that answers your question,
Steve
Joe,
You might. This level of specificity really requires a lot more discussion. I suggest you talk with your tax professional.
Generally speaking, you may not have owned a home in the past three years. If you lived in an apartment, that would seem to justify your applying for the credit. But, did you claim a home owner’s deduction or property tax exemption on the “investment property”? That could disqualify you from the tax credit.
I hope that helps,
Steve
Bill,
As with Joe’s question, there appears to be a lot going on in this transaction. And, the question really requires a lot more discussion. Again, I would suggest you discuss the specifics with your tax consultant.
Some questions to consider … will your son’s name be on title? Will he own the condo or share in the ownership? There are no restrictions in the Federal Tax Credit regarding the purchase of a home that you were renting. There are no restrictions regarding the source of funds to buy the home. So, it may work out for your son to get this tax credit.
I hope this helps,
Steve
How do I check on my first time home buyers rebate check? I filed an amended 2008 tax returns before April 15th and we still haven’t recieved it..do you have a phone number to call to check?
Thanks
Mary Anne
Mary Anne,
There is not a “rebate hotline” that I am aware of. However,you can find a local IRS office help line on the IRS website. They may be able to help you. Go to: http://www.irs.gov/localcontacts/index.html for more information.
I hope this helps,
Steve
Awesome post. One of the things I love running my own online biz, and absolutely it is different for all, is the time freedom, what is yours?