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$7500 First Time Homebuyer Tax Credit
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Update 2/12: The $15,000 provision has been replaced by an $8,000 first-time home buyer credit, according to the Wall Street Journal. The credit is set to expire November 30th unless it is extended (which is currently being discussed).
Senate Republicans added a provision that would make the credit a $15,000 tax credit for all home-buyers, not just first time home-buyers. It would also be a true credit, not a “credit” you have to pay back over 15 years.
One of the big pieces of the housing rescue bill, passed and signed into law in July, was a $7,500 “tax credit” for first time homebuyers. While experts aren’t sure whether it’s “going to work,” these types of tax credits have been used in the past so they do have some history.
There is one aspect of this bill that is surprising and it has to do with one of the qualification rules. You can own a vacation home or a rental property and still qualify for this tax credit. I don’t know if it’s an oversight because of the strict determination of “primary residence” or if it was an intended rule. I don’t think individuals who own rental property or vacation homes necessarily need assistance on buying a primary residence.
First Time Homebuyer Tax Credit Rules
To qualify, you must satisfy these conditions:
- The home much be purchased as a primary residence.
- You must not have owned a primary residence in the last three years. For couples, both individuals must not have owned a primary residence in the last three years. Vacation homes and rental properties don’t affect this (you aren’t DQ’d if you have a vacation home or rental property).
- Must not be a non-resident alien as defined by the IRS in Publication 519.
- Individuals must have a modified adjusted gross income of less than $75,000 annually and couples MAGI of less than $150,000 to qualify for the full amount.
- The phaseout range begins at $75,000 and ends at $95,000 for individuals, $150,000 and $170,000 respectively for couples.
- The home must be closed between April 9th, 2008 and July 1st, 2009.
- No mention of a credit score or history requirement, but knowing that will help when it comes to getting a mortgage. I recommend checking out myFICO.com, a service of Fair Isaac, the people who invented the FICO credit score.
How the “tax credit” works:
- The tax credit is 10% of the home’s sale price with a maximum of $7500.
- You can claim the credit on taxes filed in 2008 or 2009.
- It’s a credit and not a deduction (difference between tax credit and tax deduction).
- “Tax credit” is a misnomer because it’s really a zero percent loan with some qualifications.
Tax Credit Loan Repayment Terms
The tax credit isn’t really a tax credit, it’s really just a tax free loan with some qualifications. You have to start paying back this loan within two years and you make equal payments over 15 years. When you sell your home, any profits will go first into paying off that loan. If you sell at a loss, the difference will be forgiven… meaning you will not owe any money on the loan (though it should be recorded as income as is typical with most loan forgiveness agreements, so you will owe taxes on it).
Should You Do It?
I would, why wouldn’t you take an interest free loan? 
(Photo: orvaratli)
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I have a question. My sister bought a house with my mom. My mom is on the loan by herself as my sister doesn’t have good credit. My mom isn’t a first time buyer however, my sister is. Can she get the 7500 for 2008 tax yr. they bought it in July 2008. She is on the deed but not as of right now on the loan. She will be soon but I am just unsure b/c if my mom already bought a house before does that cancel out my sisters chances of the 7500 credit. I think her accountant did half or 3750 but I am not sure if she can do half or all or none. Thanks
We bought a home in 2005 and I was not aware of any of the first time home buyer credit. Can I go back and refile the tax to get any credit? Any help is greatly appreciated.
No. The first time homebuyer credit was not available in 2005. Only the various deductions you could have taken on your itemizing that year.
I closed on my house in February of 08. I had to do alot of work on the house and did not move in until mid april. I wasn’t sure if I qualified for the credit or not, so I called two tax advisors, both who said yes, I should take the credit. Which I did. Now I am not so sure they gave me accurate advice. What should I do? I don’t want to end up being arrested for tax fraud. HELP
From what I understand the credit becomes eligible when you move in from a house you have built. But “purchase” is defined as when the title closes for when you are buying already existing property.
Either way I believe the first-time homebuyer’s credit started April 10,2008 – Dec31,2008 for the $7,500 credit loan. Your date of Feb2008 would not qualify.
Go into your local IRS office and they will walk through some questions and give you a printout for your records.
John S. – You got terrible advice, if you closed in February 2008 you are not eligible for the credit. Not sure what the consequences will be one the IRS catches it, but at the least it will be repayment of the $7,500 with interest and most likely a penalty. You may make it onto a list for future audits as well.
I would contact them ASAP, let them know of the error and repay the credit.
My husband and I purchased our home in Decemeber of 2008. After we filed we were told we could of recieved the tax credit. So we amended our taxes and did it through h and r block. The form the lady gave us there is what I sent in. Is that it? Just the tax form? I tried calling but have been placed on hold for like 30 minutes at a time. Help
Could someone answer this question. My wife was gifted her parents house over 5 years ago. Would we still be eligible for the tax credit.
Thanks
It doesn’t matter when you last bought a house, only when you last owned a house. If she still owns it, then she wouldn’t be eligible.
If your wife(&/or you) own a primary home within past 3 years you do not qualify for this credit.
If she was gifted the home and then sold it/regifted, then you would be eligible for another primary residence home bought now.
If her parents house was/is used as rental or vacation, then it does not count towards your ‘primary residence’.
If in doubt go into your local IRS office.
No, first of all it was 5 years ago and the credit program was not avaliable then. Secondly, any gifts, or even buying a home from a family member does not quialify you for the credit.
I received the $7500 tax credit but I heard that people receiving the $8000 tax credit do not have to pay it back. Is that true? That doesnt seem fair.
Yes this is true. It’s very unfair, as people who bouth a house even one day before January first, are not eligible for the 8000 dollar handout. Very unfair. They should give that tax credit to all those that fall in the original dates for the 7500 dollar credit too. We also bought our homes when the economy was bad.
Unfortunately policy must have a start date and that generally has to cut off someone. The good news is that they provided something rather than nothing for that year. The new year brought some adjustments. This was only to be a temporary credit so down the road many will not get anything.
We still have to repay the load and when we sell our homes we are still responsible for the loan vs. their free money.
I filed for the $7500 tax credit separetly from my taxes (ammended form) in March. Its now May. Is it normal to take so long to receive it? Is there a website where i can check the status of the tax credit?
Thank you
I’m in the same boat, I called tues. of this week, and it’s FINALLY being processed. I sent mine on March 24, 2009.
who did you call to find that out?
It’s not the homebuyer credit that is taking so long but the amended return for anything takes longer to process
i bought my moms house in nov 2008 for the appraisal amount would i qualify for the 7500 tax credit
I closed on new construction on 12/31/08 I did not move in until February as the builder had not finished everything. I claimed the 7500 but now I read I can claim for the date of move in not closing. How do I go about getting the additional $500 and converting it into not having to pay it back as opposed to the 7500 that has to be repaid.
Amend your return for 2008 removing the first-time homebuyer credit. In ‘reason’ section state that this was new construction and that a wrong date was submitted as your move-in date and was in fact February 2009.
You will have to repay the credit already given to you.
Then I believe you can amend your return even further and add all the changes for the Feb2009 info, or you can wait and claim the credit when you file your 2009 return in 2010.
Best advice is to take all your information into the local IRS walkin service and ask for their help. They can submit it for you as well.
Tab, according to Turbo Tax, people who buy houses from their close relatives cannot claim the credit. The link is below, and you will find that information at the very bottom of the page.
http://turbotax.intuit.com/support/kb/tax-content/tax-tips/6360.html
I would very much like someone to give me an answer to my posting. What proof for new construction must I have as my move in date. The CO was issued prior to 12/31/08 but home was not complete they had to add some columns and paint etc so I moved in at end of January. Please help as I am very concerned about this. THanks.
Cathey, did your contractor give you a paper stating your move-in date? Even if they have smaller work to complete after you move in. Something like that that shows they are now finished and you are allowed/able to move in should satisfy an audit you might get.
My wife was gifted a house over 5 years ago by her parents. We are now selling it and must split the proceeds with her siblings. Will my wife have to pay any taxes on the proceeds. If she does she wants to account for this before she splits the proceeds with her siblings.
Thanks!
Stan, since this is listed under ‘First-time Homebuyer’ I will try to reply based on that.
If your wife was gifted a home and you used it as primary residence, she would be disqualified for the current first time credits unless it was sold more than 3 years prior.
If you did not share in that ownership you are still eligible.
If the taxes/proceeds you refer to are from the $7500 loan then yes, she would have to repay that loan in full if that property was sold/regifted. If this is what you refer to I would not think her siblings would find it fair to have that deducted prior to splitting proceeds but that’s another issue altogether.
BTW, if this gifted house was rental property or vacation home then it does not disqualify you from the credit/loan.
If this is not about firt-time homebuyer credit, then, as for taxation on the gift, there is a one time credit allowed up to a certain amount, but otherwise she would be responsible for taxes if she sold this property. Unfortunately her cost basis would be zero since it was a gift and therefore the amount this property sold for would be all profit and therefore taxable.
Again, I suggest taking all the information into the closest IRS office and know for sure based on your complete circumstance.
Actually, her basis in the home is not zero. Her basis in the case of a gift depends first of all on whether the fair market value of the home at the date of gift was more or less than her parents’ adjusted basis in the home.
If the fair market value on the gift date was greater than their adjusted basis, then her basis is the same as her parents’ adjusted basis. If the fair market value was less than the parents’ adjusted basis on the date of gift, then her basis will depend on whether the home is sold at a gain or loss. If it is sold at a gain, her basis is her parents’ adjusted basis. If it is sold at a loss, then her basis is the fair market value on the date of the gift.
Also, if she lived in the home as a principal residence for at least 2 out of the last 5 years, then even if there is a gain, she will not have any tax consequence for it due to the principal residence gain exclusion.
I bought my first home in August 2008. I could not qualify for the interest free loan credit because our income was too high, but in 2009 I am unemployed and would like to claim the credit now for our house payments. Can I claim the 2008 credit on my 2009 tax return?
My partner and I broke up and he bought a house in 2009. He received the $8000 stimulus. We are thinking of getting back together and having me added to the deed. The financing would remain in his name and unchanged. It would be his only primary residence. By changing the deed to simply add me as part owner, if I did not file for a stimulus refund, would this cause him to have to return the $8000 tax credit?
My husband & I bought a house in May and we alreay did the amended 2008 tax return. Does anyone know about how long it takes for you to get the credit back?
Did you get your credit yet? We sent it on May 23 and have not received it yet.
yes! we sent out amended return on may 26th and i got the check on July 6th
you are lucky we sent ours on may 8 and called and they still have not processed it how did u get yours so fast ??
i sent my admended return off on may 8 and istill have not recieved mine hass anyone else had this problem
thanks
I sent mine out on April 8th, and still have not heard anything back. I’m having my tax people check on it today, which is even more of a hassle, because now I have to go in and sign a bunch of forms before they can even look into it. It’s hard to figure out how the stimulus “is working” (according to a certain President), when no one (other than the banks and big companies) is getting their money…
I mailed mine on April 9th, IRS received it April 13th. I have been calling the iRS every week since the 12 week time frame. Each week I get a different answer. Now they say the time frame is between 12 – 16 weeks. Also I was told that on July 20th mine was pulled for review. But has not been asigned to a reviewer and that this may take an additional 4 weeks. I guess I should have just waited and filed with my 2009 tax return in 2010, since that appears to be when I might get my return. So much for stimulating the economy this year!!!
OBAMA, Please help!!!!!!!!!
If you filed for the credit with an amended 2008 return, unfortunately amended returns always take a long time. They are given lower priority over original returns. In addition, due to a large number of fraudulent claims for the First Time Homebuyer Credit, all of them are being checked with a fine-toothed comb. You may receive a letter asking for copies of your papers verifying purchase dates, amounts, etc.
I understand that the ammended returns take more time – but my loan is a government loan – so they should have all the proof they need – what more could be holding up the funds?
My wife and I purchased a home June 08′. It was her first home purchased but not mine. I owned a home within the last 3 years.
Can my wife qualify for any tax credit?
I’m not 100% sure but I don’t think so, you both have to be first time homebuyers.
You would only qualify if you both were unmarried at the time of the joint purchase on the home in 2008, then became married. If you were both married at the time of purchase, both spouse and yourself have to not owned a home in the past 3 years. In this s Rob or his spouse does not qualify for the credit.
http://www.irs.gov/newsroom/article/0,,id=206294,00.html
Hope this helps.
Jim is absolutely correct. If you are married at the time of purchase, both of you must be first time home buyers to qualify for the credit. This applies whether you file married filing joint or separate.
My wife and I moved to AZ in June 2008. We owned a house in PA that was turned into a rental home in 2008 that is currently unoccupied due to damages. We are trying to buy a primary residence here in Az now. Since the PA property was turned into a rental in June 2008 would we still qualify for the credit?
No. You cannot have had the home as a principal residence any time in the last 3 years.
My wife and I bought our first home in June 2008, found out about a job opportunity in our home town and had to sell the house in February 2009 so we could pursue this career. We lost out pretty bad on the deal, but were fortunate enough to sell it. Now that we are settled in, we want to buy a home again but do not have any money for a down payment. Is the $7500 retroactive – can we file for that money on our 2009 taxes next year. Please let us know!
I to filed for the loan and not heard anything.Does anyone know who to call I was approved for 1800 i did the ammended return myself.Has anyone ever recieved their check.
help! I to should be recieving my money has anyone ever gotten one.
We sent out amended return on March 7. After four weeks we called the 800 # and checked up on it, they said they hadn’t received it and that we should call back in a week. A week later they told us that they received it and it would take 12 weeks from the time we sent it to process. After 12 weeks, we still han not received our money. We called again for them to tell us that they would have the case worker call us but we had to give him 30 days. We received NO calls from the case worker. We call again after 33 days. The said that the case worker had just started going over our case. If we don’t receive our money in four weeks, we are supposed to call back.
Okay…doesn’t it seem like they’re giving us the run-around?
What is going on????
i need to know if it is to late to file for the tax credit we have already filed are 2008 taxes can we file for it in 2009 if we bought the house in 2008 what is the actual start date for the credit also
omg! we are in the same situation we own a mobile home, not the land and its not on a foundation i hope to find out if we qualify as well but no one seems to have an answer
my husband is the owner of a mobile home not the property and its not on a foundation, do we still qualify for the first time homebuyers tax credit if we buy before the deadline?
I sent my ammended return in third week in Feburary I was orginally told it would take 8 to 12 weeks to process after 12th week I called and was told there processing time was now up to 16 weeks. 16 weeks and 45 days later still not processed. I contacted my congressman and placed a complaint. They should not be able to change the rules as they go along. I signed a release of information with my sentor and they are now looking into it on my behalf maybe everyone else should do the same. Good Luck
I DID THE HOMEBUYERS CREDIT AND THE AMENDED THEY TURNED ME DOWN ASKN FOR PROOF BUTOTHER PEOPLE GOT CHECKS WITHOUT ANY PROOF.
TESE – Did you qualify? If so, provide the proof! It’s pretty easy for the IRS to verify a home purchase, which may be the reason the IRS didn’t ask for proof from everyone.
Well if you qualify you would have proof and you would still get it. If you are lying and didn’t get it you have no reason to complain!!
TESE – Did you qualify? If so, provide the proof! It’s pretty easy for the IRS to verify a home purchase, which may be the reason the IRS didn’t ask for proof from everyone.
My friend claimed the first time home buyer twice what can happen to him. Will the irs find out and why could they not see that he files for 08 and now 09?
you mean he filed already for 08 and then is going to file in 09 for the new credit? He will get caught if he gets audited in the future. I would not suggest that however he will have to repay. I don’t know why the irs does not check. Did he do it himself or at a tax place…maybr that’s why…i wouldn’t scam the irs though.
I’ve got a couple of questions – hopefully someone knows the answer….
I purchased a home – closed at the end of November 2008, did qualify and received the 2008 tax credit (got $6500, because I paid $65k for the house).
I now want to sell the house and would be willing to sell it for $64k. Is that $1000 loss enough of a loss that I would not have to pay the $6500 back?
Or….do I have to sell it for less than $58,500 ($65,000 – $6500 tax credit = $58,500)?
Ok…..next question…..a twist…
When I bought the home, I had a boyfriend (he lived with me in this home, but his name is not on the title, not on the mortgage).
He would like to buy this house from me, and we would probably do a land contract.
I’m thinking….if I sell it to him at a loss, I would not have to repay my $6500 tax credit, plus, he would qualify for the $8000 2009 tax credit.
As that just too sweet of a deal?
Any input you might have would be appreciated….
I filed an amendment at the end of June, it is now the end of Aug. and the IRS says it was pulled for review and I should receive it the first week of December! Why was mine pulled for review. I rented my house for 5 years and then bought it, does that have anything to do with it?
Can you give me the number to check the status of my tax credit amendment? Thanks.
I purchased a home in July 2008 and received the $7500 tax credit this year. I paid about $172,000 (essentially bought land and had a builder build the house on that land) but am selling it now through a realtor and will most likely end up taking a loss on the sale.
Is the repayment forgiveness the difference between the amount I paid and the actual selling price, or would it be adjusted for a realtor’s commission? Also, would that amount just be taxed as regular income?
Any guidance would be greatly appreciated. Thanks!
I purchased a home in 6/09. I am getting married to my boyfriend in 10/09 but my name is the only name on the home loan. If I file for the tax credit with my new husband, I will get the $8000 refund, but if I file it under my name, I will receive none of the $8000. So my question is… Does my husband’s name have to be on the home loan in order for us to file together?
Miranda,
I believe your husband does not have to be on the home loan in order to file together and claim the $8,000 credit. As long as you file jointly and the home is his primary residence it shouldnt matter.
If you filed married filing seperatly in 2009, you could claim $4,000 (if the home was just in your name). However you could file married filing jointly in 2009 and collect $8,000 (just for the fact you are married, and your husband name on the mortgage is irrelevant)
Hope this helps….
Okay,
So my wife and I revceived the 7500 tax credit for first time home buyers. We purchased in Aug, 2008. Do We have to pay 500 dollars a year for 15 years come tax time or can we ammend this tax credit so we don’t have to pay it back? The market was upside down in 2008 aswell as in 2009 I don’t see why we should have to pay this back considereing 09 buyers don’t have to. Is there any sort of ammendment procedure we can do with the IRS?
I have a question. My husband and I bought a home in 2008 and recieved the 7500 no interest loan. We are now thinking about selling our home and buying another one. We will make a profit but want to use it to put down on another house and pay off a car. We have heard that if you get into another home immediately you can still continue to pay back the loan 500.00 a year. Is this true? Thanks!
What constitutes a “loss?”
I owe 250k. I listed the house and have a buyer at 250k. But I have to pay the realitor 5k + 5k in closing costs = a loss of 10k.
Is that considered a loss to the US Gov? Or are short sales only considered losses? Or, did the US Gov. not even think of that scenario because they really don’t think before they act?
I have an interesting situation. I closed on a new house in May ‘09. I sold my previous house in Aug ‘06. I moved out of my previous house and in with my fiance (who rents and has never owned) in February ‘06. Since my previous house ceased to be my main home in February ‘06 and I haven’t owned a “main home” in the past 3 years, do I still qualify for the credit?
When my parents were purchasing their home back in 1987, they needed an additional person for the loan and my name was put on the title as a result. And my name is still on the title, along with my 2 sibilings.
I bought a condo this month (October 2009) and I want to know if I am qualified for the first time homeowner credit since I never live at my parent home and never have claimed it as my primary residence.
How does IRS do the verification? Run a lookup against the title?
JT
I HAVE A QUESTION ABOUT GETTING RECONATRUCTIVE WORK DONE ON MY HOME IS TRUE THAT PEOPLE R GETTING MONEY. I JUST PURSHASE A HOME THIS THIS YEARAND I WANTED TO KNOW IF QUALIFY FOR THE LOAN ON 7,500
I purchased my first home in 2008 and took advantage of the $7500 tax credit. Now that I need to sell my home for the same price I paid for it, I was wondering if I can deduct the realtor cost up to $7500 since I am not making a profit? Or,can I pass the savings on to the potential buyer knocking $7500 off the purchase price? This way I can sell the home faster.
Signed confused.
I wanted to now is there any truth to people have been received money to do reconstructive work done on there homes.I have been told that people in my community have got a refund and have ben fixn on there homes.Is this true?
I sold my home in 1/7/2007 in the market to purchase a new one, would I be eligible for the new $6500 tax credit?
If you have not purchased a home since 1/7/2007, the only way you would get any sort of credit would be if you purchased a new home and congress decides to extend the $8,000 FTHB credit until spring/summer of 2010 (which is being proposed). However, it currently expires December 1st 2009. (which is 1 month before the 3 year requirement, since you sold your home 1/7/2007)
hope this helps…
Jas
The 8K was EXTENDED!!!
I am a qualify first time buyer. Can I get this tax credit ($7,500 loan) and the first time home buyer credit ($8,000)???
My husband and I just found out that we qualified to claim the $7500 in 2008 and didn’t realize it because we purchased on a land contract in Nov 2008(only now getting the actual mortgage with a bank). Would it be wiser to file an addendum to get our $7500 or to wait until our 2009 taxes and file it then? We know we don’t qualify for the $8000 and we know we will have to repay it, we were just wondering which would take less processing time since it’s so late in the year right now and we’re hearing 16wks for an addendum file.
I bought a property as primary residence in January 2008 but rented it out right away and never lived in it. I also have it as rental property with rental income on my 2008 tax return. Now I am planning to buy a property to live in. Do I qualify for first time home buyer credit?
Sorry for the duplicate. I never saw the other post. : (