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First-Time Home Buyer Tax Credit: 6 Things to Know

February 17, 2009 RSS Feed Print

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While the proposed $15,000 home-buyer tax credit died in negotiations between the House and the Senate, the $787 billion stimulus bill that President Barack Obama signed into law Tuesday includes a similar--albeit smaller--measure designed to help revive the real estate market. Here are six things you need to know about the freshly-enacted $8,000 first-time home buyer tax credit.

1. Eight grand, new buyers: The tax credit included in the economic stimulus legislation is much narrower than the $15,000 proposal. This credit is equivalent to 10 percent of the purchase price of the home--although it's capped at $8,000--and applies only to first-time home buyers and principal residences. But unlike an earlier $7,500 home buyer tax credit, this one does not have to be repaid.

2. First time buyers defined: For the purpose of this legislation, a "first-time home buyer" is someone who hasn't owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you've owned a vacation home--but not a principal residence--within the past three years, you would still qualify for the credit.

3. 2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won't be able to take advantage of it.

4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that's $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.

5. Refundable: Because the tax credit is "refundable," qualified buyers can take advantage of it even if they don't have much tax liability.

6. Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)

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What if someone buys a house who has no business owning a home, during the Obama FTHB timeframe, and then loses it to foreclosure 24 months later due to a lack of ability to manage their finances? Are they required to pay their FTHB credit back? Or since they didn't "sell" their property to another party, is that a convenient way for the current adminstration to screw the taxpayer again?

Steve Comer of IA 4:03PM August 23, 2012

if i received the credit of 7,500.00 for a home i bought in april 2008 and have made 500.00 payments on my taxes since then,if i sell the home in a couple of months for what i owe on it will i still have to repay the credit

linda mascoe of IN 11:33AM July 05, 2012

#6- What if we sell the home in the same month of puchase three years later, just before the same date? i.e. Purchased 07/17/2009, closing date of the sale is 07/01/2012.

KDM of NV 7:22PM May 16, 2012