Finance Globe

U.S. financial and economic topics from several finance writers.
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The $8000 First-Time Homebuyer's Credit

The New and Improved First Time Homebuyer Credit

When last year's $7500 first time homebuyer credit - which was actually a loan that had to be paid back to the government - didn't do enough to stimulate the housing market, the American Recover and Reinvestment Act 2009 made the deal even sweeter.

First of all, though there was talk of it, the new credit is not for $15,000. Congress had to cut some expenses when writing up the stimulus package, and so the credit is for $8000.

First-time homebuyers who haven't own a home at any time during the last three years may be eligible to take a credit of up to 10% of the purchase price of their home, capped at $8000. This is a true credit, meaning that the homebuyer doesn't have to pay it back as long as they remain in their home for the next three years.

The $8000 credit applies to homes bought in 2009 before December 1, 2009. Individuals in a married filing separately couple may each take a $4000 credit. Homebuyers can take the credit on either their 2008 tax return due April 15th, or their 2009 tax return by using IRS form 5405.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”

The amount of the credit is phased-out for taxpayers whose adjusted gross income (AGI) is more than $75,000, or $150,000 for joint filers.

You are only eligible for the $7500 credit, or $3750 for married individuals filing separately, if you bought your home last year between April 8, 2008 and December 31, 2008.

It has to be paid back over fifteen equal annual installments beginning in tax year 2010. You'll pay $500 towards it when filing your taxes each year. You may consider adjusting your W-4 to be sure that enough is taken out for federal taxes so you don't have to come up with it out-of-pocket.

Don't feel bad for buying too soon if you're in this boat, at least you still get an interest-free loan.

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Monday, 30 January 2023

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