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How to Claim the $8,000 Homebuyer Tax Credit


If you will be able to claim the $8,000 first-time homebuyer tax credit this year or next, here’s some helpful information. A recently released revision to IRS Form 5405 will help you through the steps required to claim the credit. Here’s some more information that will help:

Can You Claim the $8,000 Homebuyer Tax Credit?

In most cases, you can claim the tax credit if you purchased a home in the U.S. that will be your primary residence and close on the home between April 8, 2008 and before December 1, 2009 (or occupy the home for the first time if you built it). To qualify, you or your spouse must not have owned any other home within three years before purchasing the qualifying home.

Who can’t claim the credit? You will not be eligible for the $8,000 first time homebuyer credit if your modified adjusted gross income is more than $95,000 (single) or $170,000 (married). You also cannot claim the credit if you received the home as a gift or through inheritance or you purchased it form a relative.

More About the $8,000 Homebuyer Tax Credit

If you purchased your home in 2008, the credit must be repaid through your taxes over the next 15 years. It’s essentially an interest-free loan. If you move within 15 years, you will owe the balance due on your taxes the year that you move.
If you purchased your home in 2009, you will not need to repay the tax credit if you reside in your home for at least three years from the purchase date. Again, if you move before the three years are up, you will have to repay the credit.

“But It’s Not Fair”

I have already received hundreds of comments about this tax credit on this blog, many of which complain that it’s not fair that some people will get $8,000 outright and others only get an interest-free $8,000 loan. It may not be fair, but remember what this tax credit is for: It’s to encourage people to buy a home for the first time in a recession and risky real estate market. It’s not to reward people who already purchased. It’s to encourage people to buy who might otherwise hold off several years. When offering a $7,500 interest free loan didn’t get the desired results, the government upped the ante by offering $8,000 outright.

I hate to use this analogy, but complaining that you got an interest free loan when others got a credit they don’t have to repay is a bit like you’re playing Deal or No Deal. Imagine you take an offer only to discover that your case is worth more. You didn’t know you had more in your case, and you risked not getting anything. At the end, you still got something you didn’t have before. So please, try to be happy with that!

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. Michael A. Behr says:

    If I buy the house in 2009, is it possible to get that credit on the 2008 tax return, or at least use it to defray some cost in 2009? Or do I have to wait until April 2010 for the IRS to give it back?

    • they are finding ways to not give people the tax credit, they said because we filed head of household on a place we were renting we cant get the tax credit. i call the irs and the guy said that they are finding ways to not give people the money

  2. Will I qualify if I purchase a home using a owner carry option?

  3. Here is my situation:
    I am engaged, we would like to buy a house in the next month. I have owned a home before, it sold July of 2006 so I am not a “first time home buyer.” My finance is a first timer.
    I have read that if you are buying jointly, but not married then the tax credit can be allocated to the firs timer if the other purchaser is not a first timer.
    We are getting married in June, so could we buy the house now, together, but single and then get married and my fiance/then husband still claim the tax credit?

  4. Hello,

    How do you figure out the phase out percentage? I make over 75,000/year and i cant find a straight answer on this, please help

  5. Dana,
    I am in the same situation. I own a home now but just bought a new one with my girlfriend, who is a first time home buyer. Would she be eligible for the credit? We also bought in 2009, good luck for us, I guess!
    Thanks!
    -John

  6. My husband and I bought a home in March of last year and he is a first time buyer, I am not. We get no breaks at all for the out of pocket costs of purchasing the home or our interest paid over the past year ( according to my CPA) and why did April 8 become the date? Even if we would not be considered first time buyers because I have owned before, What about those people that closed on their homes just a few weeks before then, like us??? How is this credit helping those people who worked just as hard to purchase a home, but get no credit???

  7. I work as a tax professional and have a question about the 7500,or 8000 dollar 1st time home buyer credit. the client I am trying to help is on social security but he has purchased a mobile home in the time frame that has been required. We cannot find out if he is disqualified due to drawing social security. We would appreciate an answer asap, thank you in advance. I will recommend the site to all of the people I know if you can get me an answer.

  8. I am going to buy my house this year 2009 on April , do I have to wait till next year 2010 tax return to get my 8,000 ? Or is there a way I can receive them this year ?

  9. I bought a house and closed in February 2009, is it possible to get that credit on the 2008 tax return. Or do I have to wait until 2010 for to get the credit.

  10. Billy,

    You can claim it this year…or next. Whatever you want to do. You can refer to the IRS website here, http://www.irs.gov/newsroom/article/0,,id=204672,00.html

    Hope this helps and Congrats on the new house!
    -John

  11. Hey! If you purchased this year you have to wait until next year’s return. And remember that it’s not just free money. You have to repay this money over time so it’s basically a loan. Be sure to read the fine print!

  12. Man am I glad that I waited till this year to buy a plac and this credit will come in useful. As an FYI, you can also claim this credit by adjusting your withholdings.

  13. Its not fair. I am nine days short for the tax credit. Our house closed at the end of March. If there is any one who knows another way. It would be greatly appreciated.

  14. Sure would be nice for those of us that bought a house from Jan 1,2008 to April 7, 2008 to be able to claim the refund. April 8th is so arbitrary. Anyone know if the gov. plans to address this issue?

    Thanks again Uncle Sam. You make us all proud.

  15. Andres,

    According to http://activerain.com/blogsview/647879/75-Tax-Credit-FAQ the single gross limit is $95,000 not $75,000. You basically take the amount of money you make over 95,000 (when filing single) and divide it by 20,000. so if you make 100,000 you divide 5,000/20,000 which yields .25 then you take that percentage & subtract it from 1.0 which gives .75 then multiply it by the tax credit amount which is 7,500 for 2008 (repaid) & 8,000 for 2009 (not repaid)…Using the 2009 tax credit of $8,000 we get $8,000 * .75 = $6,000 which is your partial tax credit.

    Hope this helps.

    Robert

  16. I have never owned a home, but have been looking around in Michigan. Currently I live in LA and will be moving up to MI next year. How quickly do I have to move into a house in order to qualify for a principal residence? Could I buy now intending to move-in next year and still get the $8000?

  17. I hope you guys enjoy this free money. I have bought four homes in the last 15 years and have paid off two. Our income has never been over 100,000 a year. Our children and grand children will bear this burden when our dollar is worthless.

  18. How can this program discriminate against you if you bought a house
    from a relative? I understand if it was a gift or you inherited it
    but if you bought it at a price that you would have paid from someone
    else. Is there any exception to this rule – sounds like discrimination
    to me – how they can tell you who, and who not to buy a house from!!

    • i feel the same way because my husband lost his job and we flipped a house and our son bought it from us and we need every bit of the money we earned to keep us a flot due to no jobs in our area. we dont have the money to give our son 8.000 dollars and we feel really bad that everybody else is getting that money but our son just because he bought it from us. it is not fair!!!

  19. What if I buy a house this year as my primary residence and then get transferred with my job and have to move…would I have to pay back the $8K if I keep it and rent it out?

  20. Could somebody please explain to me why an unmarried couple is able to claim the credit even if one of them had prior ownership in past 3 years, but, a married couple cannot? Seems like there could at the very least be a partial credit (like 1/2 of the $8000). ???

  21. I bought a house oct 15 2008 and took the 7500 intrest free tax credit.
    Since I have to pay it back am I still able to get the free 8000.
    Does anyone know?

  22. If I and my husband already have owned a home outside the US (in another country) so I am not a “first time home buyer.” I am planning the house the first time in US in March 2009. Will we be eligible for the $8,000 first time homebuyer credit?

  23. I wonder if there will be another tax credit for home purchases next year. My mother used my name to purchase her second home 2 years ago, so even though I have never purchased a home for myself, I don’t qualify. I will qualify in January of 2010, and I’ve been saving every penny to make homeownership happen for me – which is not easy as a single person. I’ll be very upset to miss out on $8000 free money because of a couple of months.

  24. I am grateful for the tax credit, but I bought my house in Oct 08 and I have to pay back my $7500 back over 15 years. My interest rate is 6.5%. Someone who bought a house at the end of last month or this month does not have to pay it back and they get an interest rate around 5 to 4.5%. Call me crazy but were we not in a recession in 2008 as well. Great post but I think you are a little confused as to when this recession actually started. It is bogus and you know it. They will end up changing the rules behind the first tax credit, because people are going to complain and the government knows that it is no fair.

  25. I just want to know why someone would not be eligible if they bought the home from a relative. My husband and I are buying a house from his parents at normal price. I want to know why I will not be eligible and I want a good reason.

  26. Once I feel out the 5405 form who do I send it to?

  27. Ron Martin says:

    The $8,000 credit for 2009 will I have to claim it as taxable income in 2010?

  28. I am expected to get back about 5000 already in taxes and i bought a home in the allowed time for the 8000 tax credit. Will i get the 5 plus the 8 to equal 13000 in a refund?

  29. I am in the process of buying a home. I have not closed yet but I am a first time home buyer and i do quailify to the 8000 tax credit. Can I claim it on my 2008 taxes to assist in buying my new home or do i have to close first and then do an amended return?

  30. John Murphy says:

    I sold my home on August 1st 2006 and have rented ever since. I am looking at buying another home very soon. For me to qualify for the 8k credit would I have to wait until atleast August 1 2009 or if I purchase in the middle of July would I still recieve the credit? Would the couple of weeks make a difference in recieving it or not?

  31. The government cannot even get a free giveaway program right… and yet the geniuses in D.C. want to run everything from the auto industry, to banking, to insurance, to healthcare….

  32. skye3312 says:

    I have been searching exhaustively to find where we can check to status of our Home Buyer Credit check…I had sent it out in Feb. where is it? Where can I check ?

  33. julerybox says:

    I am a first time home buyer. I am moving in with my boyfriend who currently owns his house with his roommate. His roommate wants nothing to do with the house when he moves out in October. I am trying to refinance the house with my boyfriend. Do I have to purchase the house outright to be eligible for the credit or does the refinanace count toward this credit?

  34. I am purchasing my first home with my fiance (this is also his first home purchase). Are we BOTH eligible for the $8,000 tax credit since we are not getting married until October of this year?

  35. josh and amie kulesza says:

    We just closed on a house July 08. Do we qualify for the extra 8000 dollars. I don’t think it’s fair if we do not. We bought our house in one of the most difficult times to buy a house. It’s only fair all people should qualify from 2008.

  36. How come we do not qulify for a tax credit if we bought our 1 ST home in March of 2008? Why is April 8 TH the date? Should it not be January 1 ST, as it is for 2009? This makes no sense to us, we are 1 ST time home buyers that purchesed our a home a month too early??

  37. Marlene says:

    Someone told me you have to claim your tax credit within five days of closing escrow or you will not get it . Is this true? And do I need to file both 1040x and 5405 or only 5405 forms?

  38. I understand that if you bought a house at the first of 2008 you get the credit. Is there anything for 1st time home buyers that bought in November of 2007?? Come on its close enough=)

  39. Waht a complete joke. Just another poorly run government program that is not fair to the people who deserve it.

    I just bought a house at full market value but because my parents were the ones selling it I cannot get the credit but my tax dollars go to people who can.

    Scumbags.

    • Same here. Complete BS

    • I dont understand why you cannot purchase from a relative. I did the same thing, full market value, went through all the banks BS. No one has been able to explain to me why you cannot claim the credit for that reason. I can understand if it was gifted or inherited, but come on, we went through everything just the same!

      • Think about it. If you could sell to a relative and get $8,000 out of the deal then everyone would be doing. The home stays in the family and plus you get $8K, pretty sweet deal if you are into scamming the government. Yes, that stinks if you bought a house from a relative and weren’t trying to cheant anyone – but there are plenty of people out there that would.

  40. You know.. talk about government. I am really discouraged right about now for (our) government. I bought my home in 02/2008, and this has been our very first home, have not purchased one within 3 years. Do we even qualify??? Hence the word first time home buyers.

  41. I bought my first house 6 months ago and am eligible for the $8000 tax credit. Unfortunately, I just found out that I am being transferred out of the area in 2 months!! I will have to rent my house here and will be staying with friends in the new city. Can I still claim the tax credit? HELP!!!

  42. Does any know how to check the status of the $8000 first time home buyers credit ??

  43. Elon Milburn says:

    My fiance and I bought our house 12/31/2009. We bought the house from his grandmother and I know you cannot claim the credit if you purchase it from a relative. I was not considered a relative at the time but we got married on 01/02/2010 only two days after we bought our house. Since we were not married until 2010 and bought the house in 2009 from his relative, am I entitled to any portion of the tax credit?

  44. I received the credit but may have to sell my house before 3 years due to a job change. Do I have to pay it back? Not flipping the house to make money.

  45. I was trying, to get a house since July last year, was in 2 short sales n 4 foreclosures, and finally got aprove in may 5 2010, if i cloth before June 30 can i still get my tax money?

  46. I am buying my uncle’s house and he is moving into a new home. Will I be able to get the credit?

  47. they are finding ways to not give people the tax credit, they said because we filed head of household on a place we were renting we cant get the tax credit. i call the irs and the guy said that they are finding ways to not give people the money. The guy said they are doing som many people wrong its crazy. its said that the money is running out and people are being stiffed because of it. Ive been sending my amended return in back and forth and they keep saying if you rented a place and you filed head of household while lioving there, it is said that you own the place.

  48. I bought a home in 2009, The IRS doesn’t want to give me my money becouse they said i filed for a morage tax ciredt. I did buy a TimeSare back in 2008 but it is not a home it’s a vacation place, and i only get to go there one week every two year’s. I didn’t even file the timesare on my taxes.

  49. My friend and I just bought a home together. We will both be living there. I’m a little confuse with the 8k credit. Do each of us get the 8000 as individual tax payers or do we have to spit the 8k?

  50. I bought a house in Dec 2009. I paid $12,000 for my home. They are telling me that I will only get back 10% of what I paid for the home. Is this correct? I was originaly told that I would recieve my refund in April 2010, but they keep approving, then denying…etc. I also recieve social security disability. Could this be why it is still up in the air?

  51. Wendy V Brejot says:

    Home Buyer Beware!! If you are applying for the 8000 tax credit there are a few “hidden” rules.
    >:( I found out the hard way that you have to be living in the god damn house or you won’t get the $$. I recently bought a house back in April but it’s not ready to be lived in yet. My mom and I are fixing it up. Who do these tax people think we are? We’re not Extreme Make Over Home Edition. We don’t have a team of designers and contractors. It’s just us. We do things slowly and little by little. YES I have told **them** that. Forget it! I’m not gonna bother anymore.

  52. I got merried my husband refinace his house that was on his name and his father. He refinace his house took his father out and put me on for new mortgage. So that was first time i got mortgage on my name. So do i still get to claim tax credit as first time buyer.