The Obama Stimulus Package 2009 First Time Homebuyer Tax Credit - Answers!

Applying the Home Buyer Tax Credit to Your 2008 Return       Applying the Home Buyer Tax Credit to Your 2009 Return

Tax Credit Can Be Used on Closing Costs

Credit Details

The new Credit is an $8,000 REFUNDABLE Tax Credit (or up to 10% of the purchase price).

So if the property is $75,000, the credit is only $7,500. (Assume a property over $80,000 for the rest of the discussion).

Refundable means that if your total tax liability in the given year is less than $8,000, the IRS will send a refund for the balance.

Refundability - Why it's Important

Many taxpayers do not have tax liability that exceeds $8,000.

For example, according to the 2008 IRS Tax Tables:

A single filer would need $46,600 in taxable income to have $8,000 in tax liability.

A couple would need $58,600 in taxable income to have $8,000 in tax liability.

Those with less tax liability will in most cases get a refund meaning they get the full value of the credit.

First-Time Homebuyer Definition

Defined as someone who owned another main home at any time during the three years prior to the date of purchase.

For example, if you bought a home on January 15, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another home at any time from January 15, 2006 through January 15, 2009.

So if the last time you owned a home was 2005, you are eligible for the credit even though it is really not your “first” home.

For married joint filers, both must meet the 1sttime homebuyer test to take the credit on a joint return.

Income Limits

This means that for singles making over $75,000 and couples making over $150,000, the credit is proportionately reduced as incomes approach $95,000 and $170,000 respectively.

So if a couple makes $165,000, the excess amount is used to create a fraction 15,000/20,000 (.75) times the credit amount. 75% or $6,000 of the credit would be disallowed.

They would still get a $2,000 credit.

The Home

The home must be located in the United States.

Vacation homes and rental properties are not eligible.

For new construction, the “purchase date” is the date you occupy the home. So the move in date must be before December 1, 2009.

Recapture-3 Year Residency

If the home is sold prior to three years of ownership, the tax credit must be repaid.

This is an improvement from the prior credit. That credit needed to be repaid in total over 15 years or the balance had to be repaid on sale.

Other Provisions

This provision is designed to prevent flipping homes in order to get the credit.

The new credit is available to residents of the District of Columbia

Purchasers who utilize state/local revenue bond financing can now use the credit.

Purchasers who bought before January 1, 2009 are still subject to the terms of the repayable credit.

When Can You Claim the Credit.

It can be claimed on your 2008 Tax Return (to be filed by April 15, 2009), an amended 2008 Tax Return, or your 2009 Tax Return.

 Who cannot take the credit

If any of the following:

Your income exceeds the phase-out range. This means joint filers with Modified Adjusted Gross Income (MAGI) of $170,000 and above and other taxpayers with MAGI of $95,000 and above.

You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.

You stop using your home as your main home.

You sell your home before the end of three years.

You are a nonresident alien.

See IRS Form  5405  'First-Time Homebuyer Credit"

source NAR

Courtesy of Al Matlock Washington DC and Maryland Real Estate 

Comments

[TC]

what if i bought my house in jan.31.2006 do i still get any credit from the goverment?

[Al]

Sorry TC but not from this package.

The bill includes first-time home buyer purchases on or after January 1, 2009 and before December 1, 2009.

I hope this doesn't apply to you, but if you are in danger of loosing your home the Homeowner Affordability and Stability Plan might help.
HUD approved counseling centers are also there to help ALL home owners in trouble..

[WhatThe]

Obama President now...

[justasking]

If my mother paid cash for a home and now she wants to sell it to me, can she do that? I would be the First-time home buyer, I would be living in the home not my mother she already owns her own home.

[Al]

Sorry Justasking but you cannot get a credit if you buy a home from a close relative.

Take a look at the above section Who cannot take the credit...

[Randi]

I am buying a home in AZ, I am a first time home buyer. Would I be eligible for the credit?

[Amanda Soon]

I read somewhere else that non-resident aliens may claim the credit too. I am a non-resident alien and I think it totally makes no sense if non-resident aliens can't claim the credit. We pay taxes just like everyone else, and we are able to buy homes just like everyone else and can help stimulate the housing market just like everyone else. I am planning to buy a home this year and plan to claim the credit.

[Al]

Amanda

I agree. We all sink or swin together.. But are you sure you are not eligible to receive the credit.. Take a look at the IRS's definition for non-resident... See Page 5 http://www.irs.gov/pub/irs-pdf/p519.pdf

[Al]

Randi

Yes! You are eligible to receive the credit unless you are included in either category below.

1. Your income exceeds the phase-out range. This means joint filers with Modified Adjusted Gross Income (MAGI) of $170,000 and above and other taxpayers with MAGI of $95,000 and above.

2. You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.

3. You stop using your home as your main home.

4. You sell your home before the end of three years.

5. You are a nonresident alien.

[Helen Richards]

If you are unemployed and wish to purchase with savings are you eligible for first time home buyer program?

Do forclosures qualify?

[Al]

Helen

You are eligible if you are a first time buyer and foreclosures do qualify.

[Mls]

How long to get it? My realtor and sales manager told me I could get it in 2 weeks and could use it as a down payment on the house I'm buying. Is this true?

[Larry]

Do Co-ops and Condo purchases count as homes?

[Al]

Mls

Your Realtor is correct. Your can file for the tax credit on your 2008 or 2009 tax return and used the credit for the down payment. Now, the time it takes to get the credit depends on the speed of the IRS.
See Page 5 http://www.irs.gov/pub/irs-pdf/p519.pdf .

Note .. If you do receive the tax credit prior to buying a home you must purchase a home by 11/30/2009.

[Al]

Larry

Yes. Any single-family residence (including a condo, co-op, or townhouse) may be an eligible provided it will be used as the homebuyer’s principal residence.

[Sarah]

If I qualify for The Obama homebuyer refund and a FHA grant, can I gt them both?

[patch87]

What if I want to by a home that was bought from my grandma years ago on a contract for deed and the party does not have the entire contract for deed paid off yet? Also, what if I bought a home from my grandmas estate. My father would benefit fromthe sale, but owns his own home.

[Susan Fulmer]

I am a single mother who is buying a home of her own. I made a cash offer against a personal line of credit to purchase a home on a short sale for my son to buy. He is qualified to purchase the home himself , yet the bank wanted cash only. Can I have my son co-sign with me on the sale of the home in order to get the tax credit? Later on during the year I plan to refinance the home and take my name off of the title.. Is this the solution?

[Al]

Single Mother follow the link below. The video will answer your questions... Best of Everything..

http://mydc.typepad.com/my_weblog/2009/06/federal-housing-tax-credit-explained-by-cheif-tax-economist-of-nahb.html

[Nancy Old Elk]

My husband and I are first time homebuyer but buying on a contract for deed by a non related party. Would this qualify for the tax credit?

[shirl]

If my dad gives me money to pay all cash for my first home, am I eligible for the 8,000. stimulous?

[Brittany]

My boyfriend and I are planning on buying a home on contract for deed. We were just wondering if that would qualify for the tax credit?

[Al]

Brittany

If the taxpayer obtains the "benefits and burdens" of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (New 7/2/09)
From the IRS website http://www.irs.gov/newsroom/article/0,,id=206291,00.html

I hope this answers you question...
Good luck..

[ed]

I am buying a home in CA, I am a first time home buyer. Would I be eligible for the credit?the tax for 2008 is 75,031 can i get my $8000

[joey]

is there a form that we have to fill out before december 1 2009 so we can apply for the money or can we just do it when we file our taxes?