$8000 First-time Homebuyer Tax Credit
Tax credits and deductions usually don’t get me very excited, but I’ve been following the first-time home buyer tax credit in the stimulus package with unusual interest over the last month. As we may actually be buying a condo this month, an $8000 tax credit makes a huge difference for us.
The original law had a tax credit of $7500, but it was essentially a loan as the credit had to be paid back in $500 increments on your taxes every year for 15 years. If you sold the home before then, the full amount was then due immediately. A first-time home buyer is defined as someone who has not owned a home in the previous 3 years. If this tax credit had stayed on the books and our condo purchase came through this month, I’m not sure we would have taken this credit. In fact, the original $7500 tax credit has been found to have little effect on the housing market.
The final bill of the stimulus package (American Recovery and Reinvestment Act of 2009) has an $8000 tax credit for first-time buyers (same definition as above). The $8000 is not a loan and is yours to keep as long as you live in the home as your primary residence for three years. If you do sell or rent it before then, you would have to pay the tax credit back. The size of the credit is 10% of the purchase price of your home up to $8000. So as long as your home costs more than $80,000, you can take the entire credit. However, the credit is subject to income limitations. You have to make less than $75,000 if your single and under $150,000 if you are married filing jointly.
What is less widely know about the tax credit is that even if you purchase your home in 2009, you can claim the credit on your 2008 taxes! We did this and used the money to immediately improve our new home. If you’ve already filed your taxes for 2008, you can submit an amended return to claim the credit early. But it’s worth looking at whether or not the credit will be more valuable to you in 2008 or 2009.
Do you plan of taking advantage of the new first-time home buyer tax credit?
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