First-time Home Buyer Tax Credit Provides up to $7,500
Did you know that if you are an American buying your first home between April 9, 2008 and July 1, 2009, the U.S. government will give you up to $7,500 in the form of a federal tax credit?
Update: New legislation in 2009 has expanded upon the initial $7,500 tax credit. Although there is valuable information here for people who purchased homes in 2008; anybody buying in 2009 may also want to read about the $8,000 tax credit and how to claim this credit.
The tax credit is part of recently-enacted legislation to help the nation recover from the recent mortgage crisis. Basically, the first-time home buyer tax credit is designed to keep Americans buying homes. Not so much for our sake, but for the sakes of builders, real estate agents, and mortgage lenders who earn their livelihood from home sales.
Still, this tax credit, along with soft real estate prices, make it an excellent time to buy a first home.
How does the tax credit work?
The tax credit is basically an interest-free government loan of 10% of your home purchase price, to a maximum of $7,500, to help defer the initial costs of buying your first home.
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Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 can get the full tax credit, and taxpayers with higher incomes may be eligible for a partial credit.
Taxpayers can claim the credit on their federal tax returns for the year in which the home was purchased. The taxpayers will then repay the credit over the subsequent 15 years of tax returns, interest free.
For more information, the National Association of Home Builders provides some consumer information about the tax credit.
Ready to go house-hunting? Save time, money, and aggravation by lining up your financing first with a mortgage pre-approval. Read my post on how to get no-obligation mortgage quotes online.
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Related Posts
- $6,500 Home Buyer Tax Credit
- $8,000 First-Time Home Buyer Tax Credit
- $400 or $800 Making Work Pay Tax Credit
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What if I am married but I am the sole signer on the mortgage and file injured spouse. Can I assign the entire $7500 credit to myself when I list out the income and deductions?
Good question… not sure, Sherrie!
(It would be nice if the IRS/Government realized just how confusing they made this tax and just give it to everyone!)
Has this one been resolved? The wife bought a house before getting married and they both lived in it as a primary residence within 3 years but only her name was on the deed and mortgage. They bought a new house this past summer and the husband qualified for an FHA loan and only his name is on the deed. Can he claim the credit if he files married filing joint or at least $3,750?
Please write all your congressmen (House of Reps & Senators) and you can also go on the White House website and ask them to go retroactive with the credit. I bought my house the end of October and I think it is ridiculous that I have to pay it back and someone who bought their house 2 months later does not. The housing market was just as bad then as it is how. Maybe if we get enough people to write about this they will retroactive the no-payback credit.
What happens if you apply for the credit and later it’s determined you didn’t qualify? How well do they even check that you qualify or not? I am in a unique situation that is not clearly covered. By the wording found on the 5405 form I believe I qualify. Wording on the federalhousingtaxcredit.com website makes it sound like I don’t qualify. If I had never seen that website, I’d have no doubts. Now I’m not sure what to do. Some say they will never check anyway and if they do I have a valid argument, but I know that arguing with IRS is going to be a losing battle.
For people who are whining that they don’t qualify for the $7500 or the $8000 or who only qualify for the $7500…stop whining. Congress never had to give it to people in the first place.
There are stipulations because they are giving out taxpayer money without the taxpayer having a say in the matter except with comments to their Congressmen prior to the vote. You are using other people’s money when you accept this tax credit. There is only so much of it and there is only so much that can be allocated to ideas like this. There are still roads to be built, money to be given to California to build a railroad to Las Vegas and other earmarks that are part of Obama’s Christmas wish list. It isn’t free and there is only so much money to go around.
The cost of the new law is below $800 billion partially due to the tax credit going from $15,000 to $8,000. People obviously don’t realize the repercussions this plan has on the economy (there is no guarantee it will help in the first place) when you have to print new money to pay for something like this. The dollar goes *down*. That has bad consequences but nobody seems to care about that. They just are greedy and want their fair share. Life isn’t fair though. Everyone can’t be given a handout at taxpayer expense. There has to be limitations.
Hey Brandon – shut up! This isn’t the forum to go spewing your anti-Obama crap. We are all hard-working people that are trying to find out answers to this confusing new tax credit thing. Some of us are super annoyed that we miss out…by a matter of days. That does not give you the right to call us whiners. I am a taxpayer too – how is this “other people’s money”? I did everything right – saved and bought a house that I can AFFORD. Because of some arbitrary date that was picked out of a hat, I miss out on a tax credit that would really help right now. I don’t even care about the “free” money being given out to those buying this year. I would gladly pay back the $7500.
Get off your high horse and find another forum if you want to leave comments like that.
Will this loan affect my credit score?
Quick Question- I just filed my taxes and would qualify for this tax credit. I’m still on the fence. On the one hand- I could use the extra money- ( 2 brothers with kids and no jobs), But on the other one, I don’t want the gov.t, to say 3 years from now- Pay all in full back now!! Is there any chance of something like this happening?
The bill is set. They cannot change the Bill, At the time of you taking the Credit/loan. They must honor What What on the Bill or Form 5405
The bill is set. They cannot change the Bill, At the time of you taking the Credit/loan. They must honor What on the Bill or Form 5405
Diane, you only have to pay it back in full within 3 years if you sell your house you just bought within 3 years after filing for the credit. Otherwise you don’t have to pay back the $8,000 at all. The $7,500 has to be paid back in full but over a 15 year period starting on the 2nd year after you filed for the credit.
They can’t change their minds on this on a whim. If they could they would do so for any other tax law that exists. It must be modified by Congress for them to say one day that you must pay it back in full. That isn’t what the law states now so unless another amendment is passed you only have to pay it back if you sell the house within 3 years.
This is totally unfair. I purchased my home in Sept. of 08 and I recieved the tax credit of 7500 dollars thats I have to repay but the people who purchase in 09 get 8000 dollars and don’t have to repay? What the Hell is that all about!!! That is not right!
i have signed a contract today on a trailer in a trailor park today that i must fix up by may 19th 2009 and then they will give me the trailer and i must put it in my name by june 19th 2009 so the trailer is mine by july 2009 so far i have put 2000 dollers in the trailer it is my first home so will i get the tax credit next year
I got an interesting situation here, and ive read all sorts of things. Im a first time homebuyer, and qualified for the 7500 tax credit, and did my taxes in January, done and filed, refunds and this credit received. My home was bought on January 12,2009. And now with the new 8000, should I amend my 2008 return to get this credit instead, or should I wait until 2009, receiving the 8000 on my 2009 return, even though I received the 7500 in 2008? Would be ok with me of course, but just wondering if anyone else has any info or knowledge on this. Id just use one to pay the other off I think. Very strange rules though but im not complaining, the tax credit helped me greatly in my decision.
Rob:
The new form for the $8000 credit is out and you will be able to amend your taxes to get the raiming $500. You can also wait for next year if you’d like to claim the rest of your monies. You will not however, be able to “double dip.” My situation was the same as yours but I waited until the new form came out. You will not have to pay back the $7500 as you fall within the new guidelines.
I have a question or possibly just someone to explain this. I purchased my home in 09/09/08 from my parents but paid full value price of the home. WHy is it that im not eligible because I purchased from a family member. Why is that a stipulation?
Question! My husband and I saved up and purchased a condo in Aug. 2008. We qualify for the $7500 tax credit, but I already want to sell the condo and buy an actual home. We haven’t filed our taxes yet. I was wondering if there was a way to not claim our condo, sell, and buy and new property and still qualify for the $8000 credit. Anyone know?
Daisha – You cannot take the $8000 because technically you are not a first time home buyer. In order to take the credit, you have to have NOT owned a housse within the last 3 years. I would take the $7500 credit for the condo.
Daisha…
You could perhaps do what you have mentioned. The trick will be NOT to live in the Condo long enough for it to be considered a primary residence. Make sure your loan is adjusted to reflect that, rent it out for a few months, etc.
Make sense?
Obviously, I would still consult someone for accuracy of this opinion.
Hope this helps!
What method is the irs going to use to verify that you just bought a house. title or loan?
damn..closed the house on april 8th 2008! missed the $7500 interest free loan by a day
is there anything that could be done?
What if I purchased my house in March 2008 but move in to the house on July? Do I qualify for the $7500 credit?
What if I purchased my house in March 2008 but move in to the house on July? Do I qualify for the $7500 credit?
I was getting my taxes prepared at HR block and the lady said that they were trying to pass a bill where you will not have to repay the $7500 tax credit at all. Has anyone heard anthing about this bill? It would be nice if we didnt have to repay it. Also she told me that since the money is a loan, we dont have to claim it as income next year. Please advise me as to if this is correct or not.
Thanks
Erika, the criteria is that you must have closed on the house after April 8, 2008 up to July 1, 2009 to claim the $7500. The close date is what they go by to determine if you owned it during the time they said you must in order to meet the criteria. So no, you don’t qualify.
Amy, the bill was the wish list (aka the stimulus bill) that Obama signed into law a week or so ago. The modifications inserted into the stimulus bill which apply to the housing bill last year raise the $7500 to $8000 and remove the stipulation that you have to pay it back (as well as relax stipulations for qualifying). You have to have bought (closed) on your house in 2009 in order to qualify for the $8000, otherwise you only get the $7500 and you have to pay it back. Those are the rules (in a nutshell).
Brandon,
Thanks for the reply.. Let me get this straight… Since I closed in 2008 I have to pay it back, but If I had closed in 2009 I wouldnt have to pay it back???
Amy,
Based on the original wording of the Act (forget the real name) as it was written in 2008 and the wording in the stimulus bill used to modify the original’s Act wording, yes. I listed the original dates of qualifying in my last message however those dates have been modified to now be that if you closed on your first house on or after January 1, 2009 up to sometime around November/December of 2009 then you get $8,000 and don’t have to pay it back.
Yes, it is semi-arbitrary. Yes, it could be considered by those who don’t qualify for $8000 to be unfair but think of the people who don’t qualify for the $7500 either. There are limited tax dollars to go around (even less now that AIG, CitiGroup, and BoA have been given billions) so they can’t give everyone who bought a house money without putting the country in an even worse position than it already is. Those who wanted money from TARP, TARP2 and the American Investement and Recovery Act (I think that’s the name of the stimulus bill) are basically asking for an allowance from Big Daddy. The government is not our parents and any money we (citizens AND businesses) do get is the People’s money. It does not grow on trees.
I hope you are glad you get $7500. You could have easily gotten $0 either through not qualifying at all like some people or simply because Congress didn’t have to pass that bill last year. There are many things I don’t qualify for under the tax law because I’m single with no kids, don’t make enough money, make too much, etc. but I don’t complain about them. I just don’t meet the various qualifications. Those are the rules. Simple as that. Best you can do is complain to your Congressmen but I doubt anything will change the qualifications as they stand now for the first time home buyer’s credit.
Bottom line though is that you should consult a tax law professional rather than someone on this forum. Be careful who you talk to though because even some of them are unaware that the stimulus bill had provisions for modifying the original Housing Act last year. It wouldn’t surprise me if some Congressmen didn’t know the modifications were in there since they probably didn’t read the entire bill during the few weeks they were trying to pass it.
I have two questions:
I own a home but am refinancing and adding my fiance to the loan and the deed. He has never owned a home so does a refi count for the credit?
My parents are separated and in the separation agreement he is keeping their home. It looks like she would qualify as a displaced homemaker for the credit but since they are still married how should she file her taxes???
If I am looking to purchase a foreclosed home, will I qualify for the tax credit??
Why do people that recieved the Tax credit in 08 have to pay beck, yet if you buy in 09 you do not?
Kerensa,
Because that is the way the people who make the laws modified the existing law in the details of the stimulus plan that Obama signed. If you don’t like it contact your Congressmen because they are the ones that voted on it (and one of their offices would have made the suggestion to write it that way). Don’t expect any changes though. They did it in order to create a better incentive for people to buy homes.
With regard to question #38 and your answer #39. I purchased my home on April 14, 2008 from my grandmother. We have a signed agreement that has been recorded with the county recorder’s office. I pay all taxes, insurance, etc. I also pay her 5.5% interest and will do so for the 30 years of the terms of the purchase agreement. (prime plus 1/4 at the time of the sale). Do I still not qualify because it was my grandmother? The terms of the sale and repayment are the same as if it were a private seller I did not know carrying the loan. Am I just out of luck?
Does this credit apply to all states?
Sharla,
It is a federal credit, not a state credit.
Chris,
Read the details of the new law (old law combined with the mods in the stimulus plan) and/or the new tax form (Form 5405 I believe from irs.gov) to see the stipulations. I don’t recall if the modifications included in the stimulus plan removed the “relative” stipulation. If they aren’t removed then you don’t qualify.
Wow… entitlement entitlement entitlement. There’s a whole lot of complaining in these comments. NONE of us have actually done anything to deserve this credit. If you bought a house without the assumption you would get this credit, then why in the world are you complaining? You got what you paid for. If you bought a house at the end of 2008 and qualify for the interest-free loan, but not the straight-up money handout, they you have nothing to complain about, you got exactly what you expected to get when you bought your house (and maybe more!). Come on people! What is with this ridiculous since of entitlement?! Goodness gracious!
Zebov,
We are living with the “me too” generation. It doesn’t help that the government also believes it is responsible for giving people (mainly businesses) money. That is in addition to the existing welfare system. The problem is that they are giving away taxpayer money. If anything they should be giving our money *back* to us. In a sense this credit could be considered something like that but of course not everyone qualifies.
Not everyone qualifies for the child tax credit but I don’t hear anyone ever complain they don’t qualify for that. We can’t all qualify for the same tax credits….if we did the Treasury would have possibly been out of money long ago. But it will soon be out of money anyway if Obama has anything to do with it.
I don’t think a lot of people realize that this money is coming from taxpayer money. It doesn’t come from an infinite supply so there has to be restrictions on who can qualify if only for that reason. Then again maybe they got the mentality it is infinite from Obama who seems to think it is infinite. If you keep printing money then I guess it is but you have other consequences when you do that, such as the price of oil goes up which means gasoline goes up.
Bottom line: The gov’t is not our parents and we shouldn’t expect anything from them in the way of financial support. If anything should be given to us it should be any money already turned over in the form of taxes but only so much of that can be done because, again, there is only a finite supply and we still have to have money in the Treasury to pay for stuff like gov’t employees, etc.
By the way, good take on the situation zebov.
I just got a call from the IRS and she said that the single parent and displaced homemaker clauses from HUD do not qualify for the credit. I don’t know that she had any idea what she was talking about but there it is.
I have been hearing a lot of things regarding the $7500 first-time homebuyer credit. I filed in Febuary 2009 it has now been 7 weeks and have not recived my refund. When I look on the web site for wheres my refund. It tells me to call the IRS 800 number. I call and no one can give me an answer as to what is the hold up. I dont owe any money and there seems to not be an error on my end says the IRS customer service, but yet still no explanation to what the hold up it. They do however say that this is way to long and that it should have been proccesed. So my question is… Is any one else having this problem, is there a reason for the hold up.
Van,
Hard to say what the problem is but there is definitely a problem. My uncle did my taxes and submitted them near the end of February and my $8500 was in my account by March 6. My uncle filed an amendment to get me the additional $500 ($7500+500=$8000 for home buyers this year; I closed Feb 13th) which was the only way he understood for it to be done (I disagreed). The amendment paperwork has been turned in but I haven’t got the additional $500 yet but the original filing took only about a week for me. Keep trying because something is definitely up with yours.
I am selling my house to someone who qualifies for the first times home credit. Can I finance the purchase? Also can I give the buyer a contract for deed instead of a mortgage and still qualify for the tax credit?
My husband and I purchased a house in Sept 2008 and we could not believe when the first time homebuyer’s tax credit was changed from a loan that needs to be repaid to one that does not.
Please make your voice heard on the following petition site:
http://www.thepetitionsite.com/1/2008-First-Time-Home-Buyer-Rebate#signatures
Hopefully it will be amended and we can keep our money, too.
is thid first time home buyer credit separate from your tax refund or is it included? i was thingking i was going to get a separate check for $7500. was if wrong?
Sue,
The first time home buyer credit is just like any other credit in that it is applied to your overall refund amount. Therefore it is included in your check or direct deposit transaction. Why would this credit be treated any differently than the existing credits (like the earned income credit or the child tax credit)?
Can I use the Money to pay my bills instead to buy a house?
Silva,
You can use the money for whatever you want. It is your money just like any other tax credit you get is your money. But you won’t get this money until the house is yours and they define you owning the house as the date you close on the house. Therefore you won’t have the money prior to purchasing the house so you couldn’t use it for buying the house even if you wanted to.
the $7,500 tax credit is a joke compared to the $8,000 tax credit. I purchased my home in 2008, do I still have to pay back $500 every year? They should seriously consider modifying the 2008 faux tax credit that you have to pay back. Its not fair
Chris,
Yes you still have to pay back the $7,500. The stipulations on the $8,000 includes requiring you to have closed on the house between January 1, 2009 and December 1, 2009 (approximately, I forget the exact end date). Maybe they should consider modifying it, yet again. Why not throw more money at the problem right? Money just grows on trees. It isn’t like the money came from the taxpayers and that there is only so much to go around, especially with all the other spending that Obama thinks will solve our problems.
By the way, do you have kids? Are you self-employed? Do you own a farm? I’m just wondering because if you answered “no” to those questions (and hundreds of others I can’t think of or am unaware of) then you don’t qualify for hundreds of other tax credits. Are you going to complain that those aren’t fair either?
I can’t answer “yes” to any of those questions but I’m not complaining that the tax credits associated with those are unfair. It is my choice. I even know they exist so I could start a farm right now and buy equipment to right off. And yes, you didn’t know ahead of time that they would change the law to not have to pay back the $7,500 if you bought a house this year but that’s life. Congress changes tax laws every year and people fall in and out of qualifying because of it. Deal with it.
Thanks Brandon, I guess everyone is a cynic. I couldn’t find this information on the internet. Guess people can’t ask questions these days. Good day.
Chris,
Many people post messages like yours on this website so the response I gave is the “quick” response to something like “it’s not fair”. Take a look at the stimulus plan wording if you want to see the modifications that Congress made to the first time home buyer’s act last year. Other stipulations were removed so it is actually less restrictive than it used to be. For example, previously if you bought your first house off your relatives you didn’t qualify. You can ask questions but your post was asking the same question that has been answered countless times on this website. Given that and your seemingly naive complaint of “it’s not fair”, I thought it warranted the response I provided. Feel free to ask additional questions though, seriously. But you may want to skim the website (use your browser Find function to help you) prior to posting in case your question(s) has already been covered.