First-time Homebuyer Tax Credit Q & A

There are several differences between the 2008 ($7,500) first-time homebuyer tax credit and the 2009 ($8,000) one signed into law recently.  The most significant difference is that the 2009 credit does not have to be repaid, for the most part, like the 2008 credit does.  So by “credit” the government really meant more like “zero-interest loan” I suppose.

Here are some of the more common questions I’ve been getting about the credit and their answers.

Q: Who exactly is considered a first-time homebuyer?

A: First-time homebuyers are buyers who have not owned a home at anytime during the previous three years.

Q: When did/does the purchase of my home need to close to qualify for the credit?

A: To claim the 2008 credit your purchase would have to have closed on or after April 9, 2008 and before January 1, 2009.  To claim the 2009 credit your purchase needed to/would need to close on or after January 1, 2009 and before December 1, 2009.

Q: If I purchase my home in 2009 can I use the credit on my 2008 taxes?

A: YES!  This might be the coolest part of the plan.  If you close on the purchase of you home prior to filing your 2008 taxes, you can take the credit immediately!

Q: Did I have to buy a “stick-built” home to qualify?

A: Almost any type of residence will qualify as long as it is your primary residence.  Examples of other types of properties would be a houseboat, a condo, or a manufactured home.

Q: Does every first-time homebuyer qualify for the credit?

A: Unfortunately not.  There are income limitations to taking the credit.  The amount of the credit will be reduced if your adjusted gross income exceeds $75,000 for single filers and $150,000 for married filing jointly.  You become ineligible for any of the credit if your adjusted gross income exceeds $95,000 for single filers and $170,000 for married filing jointly.

Q: How does the repayment of the 2008 credit work?

A: If you claim the 2008 credit on your 2008 tax return, you will begin to repay the credit in the 2010 tax year.  You must repay the credit, unless you sell the home, in 15 equal parts.  This would mean for the people who took the maximum $7,500 that their taxes would increase $500 for the years 2010 through 2024.

Q: Are there any circumstances in which the 2009 credit would also have to repaid?

A: Yes.  If the home purchased does not remain your primary residence for 36 months after the purchase.

You can read more about the credit on IRS form here as well. Please forward this information along to anyone you know who might qualify for the credit that would benefit from an extra $8,000 this tax season.

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