The Final Outcome of the 2009 Home Buyer Tax Credit.

When the President signed into law the $787 billion economic-recovery package in February, certain tax breaks were scaled back from the proposal. It was our hope that the new tax credit would apply to all home purchasers and would be up to $15,000. What ended up being signed into law was an $8,000 tax credit for first-time home buyers that is not required to be paid back. This new credit will be available to eligible home purchasers beginning January 1, 2009 and ending December 1, 2009.

Some Quick Facts about the New Tax Credit

• All principal residences are eligible.


• You must be a first-time homebuyer as well as your spouse. The rule states that if you owned a principle residence in the last 3 years before your new purchase, you are not eligible.


• Maximum credit amount increased last year from $7,500 to $8,000 this year.


• The full amount of credit is available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). The amount of the credit begins to phase out for taxpayers whose adjusted gross income is over these limits.


• No repayment of purchases on or after January 1, 2009 and before December 1, 2009. This is a true tax credit and not a deduction. The 2008 tax credit of $7,500 had to be paid back.


• Any unused amount of tax credit will be refunded to the purchaser when tax returns are filed.


• A taxpayer doesn’t have to repay the credit provided the home remains their personal residence for 36 months after the purchase date. A taxpayer can claim 10% of the purchase price up to $8,000 or $4,000 for married individuals filing separately.

Q&A
(Information below taken from www.savingtoinvest.com)

Question: Will home buyers who made purchases last year between April 9th and December 31, 2008 be eligible for the new credit?
Answer: No. They will continue to be covered by the $7,500 tax credit that was enacted last year. They will also have to repay this amount unlike 2009.

Question: Can I claim the $8,000 home buyer tax credit on my 2008 returns?
Answer: Yes. You can include it in your 2008 returns by using form 5405. If you have already filed your 2008 taxes, you can file an amendment or adjust your paycheck withholding for the credit amount so that your take home pay for the rest of the 2009 is higher. (For example, $8,000 over 8 months is an extra $1,000 in your monthly paycheck).

Question: If we bought in July of 2008, but have not used the credit, can we use the new 2009 credit instead? If not, can I claim the difference between the old credit and new credit?
Answer: No. The 2009 tax credit is only for homes purchased this year. You can only claim the old $7,500 credit. However, if you bought your house in January or February of 2009 and had already filed your returns under the old credit, you would be eligible to file an amendment for claiming the additional $500 under the new credit.

Question: If I co-buy a house with someone who is not a first-time home buyer, can I claim the whole credit?
Answer: If two or more unmarried individuals buy a principal residence, they can allocate the credit among the individual owners using any reasonable method such as 50/50 or whatever is agreed upon. The total amount allocated cannot exceed the $7,500 ($8,000 if purchased in 2009) or 10% of the purchase price.

Question: I am interested to know if the credit will be available to those putting down 3.5% as per FHA loans or if a 5% down payment is still required?
Answer: No concrete word on the down payment requirement, but since the Senate proposal for a 15k housing credit was dropped; I assume their 5% requirement was also dropped and that the current 3.5% FHA limit would stay in place. Also, remember the FHA loan has certain other criteria to meet which all borrowers may not qualify for. If you do get a loan through your bank or broker, most likely you will need a 10-20% down payment in any case.

For the revised Form 5405, “First-Time Homebuyer Credit”, go to www.IRS.gov.