8000 Tax Credit Questions and Answers

Are you interested in buying a new home this year and have questions about the 8000 tax credit? You are not alone.

UPDATE: The 8000 Tax Credit Has Been Extended and Expanded:

$8,000 First-time Home Buyer Tax Credit Expansion Details

  • The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
  • The tax credit does not have to be repaid.
  • The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
  • The tax credit applies only to homes priced at $800,000 or less.
  • The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
  • For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
  • For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The $6,500 Move-Up / Repeat Home Buyer Tax Credit Details

  • To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
  • The tax credit does not have to be repaid.
  • The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.
  • The tax credit applies only to homes priced at $800,000 or less.
  • The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.
  • Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

UPDATE: Can The 8000 Tax Credit Be Used As A Down Payment?

Some of the most common questions that we have gotten about this program have been answered by the National Association of Homebuilders who have set up a website to specifically answer these questions.






  1. Who is eligible to claim the tax credit?
  2. What is the definition of a first-time home buyer?
  3. How is the amount of the tax credit determined?
  4. Are there any income limits for claiming the tax credit?
  5. What is “modified adjusted gross income”?
  6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
  7. Can you give me an example of how the partial tax credit is determined?
  8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
  9. How do I claim the tax credit? Do I need to complete a form or application?
  10. What types of homes will qualify for the tax credit?
  11. I read that the tax credit is “refundable.” What does that mean?
  12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
  13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
  14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
  15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
  16. I am not a U.S. citizen. Can I claim the tax credit?
  17. Is a tax credit the same as a tax deduction?
  18. I bought a home in 2008. Do I qualify for this credit?
  19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
  20. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
  21. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Comments

  1. Eric E. Williams says:

    Can a first-time homebuyer that buy’s into a coop take advantage of the $8000 Federal Income Tax Credit?

  2. Eric E. Williams says:

    I practice real estate primarily in Princes Georges County, Maryland.

  3. Can a relative sell to a relative( Mother to Daughter & Son in Law) and take advantage of the $8000 for fisrt time home buyers?

  4. @Carlos,

    To my understanding, it doesn’t matter who you buy the home from, what matters is that you can qualify as a first time home buyer. Double check with your accountant for sure! You can also visit:

    http://www.federalhousingtaxcredit.com/2009/index.html

    Justin

  5. adam thompson says:

    i am a 1st time home buyer and i bought a house legitimately but it was from a parent how do i get the tax credit. or at least get zero down

  6. patricia says:

    my husband and i are getting ready to buy a house on a rent to own basis, can we still get the tax credit or does it need to be a loan?

  7. If I do a rent to own lease do I qualify for the tax credit?

  8. I’m going to be purchasing a cheap home cash for $32,000 can I qualify for the tax credit? and it will be 1,000 for every 10,000? also i will be closing in september how will it work?

  9. @ adam a,

    Here is the answer to your first question:

    http://www.federalhousingtaxcredit.com/2009/faq.php#3

    And after you close, you can find the form to complete on the IRS website, complete it and turn it in.

    Here is a link with exact instructions:
    http://www.federalhousingtaxcredit.com/2009/faq.php#9

    Good Luck!
    Justin

  10. I know alot of people that received the tax credit but did not purchase a home, what will be the penalties if any and will they have to pay that money back.

  11. Gary Walker says:

    My son just closed on his first home 5 days ago he signed as a first time buyer but my wife and I are on the morgage as well for co buyers. Would my son be eligible for the tax credit?

  12. Judy McCullough says:

    Just had a question from a client – we have a buyer that wants to purchase his home on land contract. Would a land contract be eligible for the tax credit? Thank you.

  13. Judy, that’s a great question regarding buying on a land contract. I am not too well versed in them (land contracts), but understand it to be a purchase on an installment plan where the purchaser doesn’t actually own the property until the installment plan is completed. So, the seller remains the actual owner of record. Not knowing the full legalities, it is safe to assume the the buyer doesn’t really become a homeowner until they actually own the property, and would then not qualify for the tax credit. I could be wrong though. This is one that I would have your buyer consult with their tax professional… just to be safe.

    Gary, I’ve had this come up many times, especially with a parent co-borrowing for their kid on an FHA loan. In all cases that I personally know of, the buyer was given the tax credit. However, I’ve heard conflicting responses from individual tax pros. Some say no problem, the kid is the homebuyer. Other say that the kid qualifies for half of the tax credit. This is another one that I would verify with your tax professional. If they advise you and prepare your taxes, they will stand behind you if it becomes an issue later.

    S. Smith I know you wrote this a while ago, but I wanted to respond. There are lots of cases where people submitted for the tax credit without actually buying a home… I have heard it numerous times on the news. To those people… watch out. It’s only a matter of time before it’s found out. Logic would say that there will be penalties and that they would have to pay it back. After all, if they got a homebuyer tax credit and didn’t actually buy a home, they really didn’t qualify for the credit.

  14. Have a question for my friend. She and her husband are both retired, so they don’t file income taxes anymore. They haven’t owned house for more than 3 years. Now they want to buy a house. Would they be eligible for the tax credit? If yes, how does it work? Do they file tax on the house they purchased?

  15. Shane,

    What if I am a new home owner during the period of the tax credit, and that the house was not my “main” home. Can I still claim the credit?

  16. Carmen Arruda on 8000 dollar tax credit
    Further 2010 Extension of $8,000 First Plus New $6500 Existing Home Buyer Tax Credit From the 2009 Stimulus Package and Increase in Income Limits
    With the deadline looming for the home buyer credit (see details below), many readers have asked if there is any update on a further extension of this popular tax credit. Recent housing data suggests that the housing market is still struggling with pending home sales dropping nearly 8 percent. The drop in pending (contract) home sales and unexpected declines in purchases of new and existing homes last month, adds to evidence the housing market, at the center of the worst recession since the 1930s, is still struggling to rebound. Further, the government has been forced to roll out new measures to help struggling homeowners facing foreclosure. So the question a number of realtors, housing industry members and would be home buyers are asking is that will the home buyer credit be extended again past summer?

    Undoubtedly there is significant negative sentiment towards the home buyer credit, particularly from those home buyers who could not take advantage of previous versions with lower income limits; and from most conservative groups and fiscally focused politicians who want the home buyer tax credit to expire as planned. However, in addition to allaying the weakness in the housing market, extending the home buyer credit again could be a smart political move in an election year. Lawmakers, now more than ever, are looking for any successful mortgage and/or housing-related program that they can stand behind. Besides the Fed’s mortgage-backed securities (MBS) purchase program, the home buyer tax credit has been touted by some as an extraordinary success. Such, “success” can provide the necessary political cover to advocate extending the credit, especially since the simple fact is that it if doesn’t work — that is, if it’s not being utilized — that it costs nothing. Deficit issues and the concept of whether we’re rewarding those who might have bought anyway will take a back seat. Keeping home sales going promotes home price stability, and that makes for less-grumpy voters as election time rolls around.
    Carmen Arruda

  17. With the deadline looming for the home buyer credit (see details below), many readers have asked if there is any update on a further extension of this popular tax credit. Recent housing data suggests that the housing market is still struggling with pending home sales dropping nearly 8 percent. The drop in pending (contract) home sales and unexpected declines in purchases of new and existing homes last month, adds to evidence the housing market, at the center of the worst recession since the 1930s, is still struggling to rebound. Further, the government has been forced to roll out new measures to help struggling [COLOR=#0054a6! important][COLOR=#0054a6! important]homeowners[/color][/color] facing foreclosure. So the question a number of realtors, housing industry members and would be home buyers are asking is that will the home buyer credit be extended again past summer?

    Undoubtedly there is significant negative sentiment towards the home buyer credit, particularly from those home buyers who could not take advantage of previous versions with lower income limits; and from most conservative groups and fiscally focused politicians who want the home buyer tax credit to expire as planned. However, in addition to allaying the weakness in the housing market, extending the home buyer credit again could be a smart political move in an election year. Lawmakers, now more than ever, are looking for any successful mortgage and/or housing-related program that they can stand behind. Besides the Fed’s mortgage-backed securities (MBS) purchase program, the home buyer tax credit has been touted by some as an extraordinary success. Such, “success” can provide the necessary political cover to advocate extending the credit, especially since the simple fact is that it if doesn’t work — that is, if it’s not being utilized — that it costs nothing. Deficit issues and the concept of whether we’re rewarding those who might have bought anyway will take a back seat. Keeping home sales going promotes home price stability, and that makes for less-grumpy voters as election time rolls around.

    As of yet, there are only a few official rumblings about further extending the home buyer credit for new and existing home buyers. However, if the housing market and political climate continues to deteriorate I would not be surprised to see the credit extended again (albeit with slightly different conditions) to at least the end of the year.
    Carmen Arruda

  18. With the deadline looming for the home buyer credit (see details below), many readers have asked if there is any update on a further extension of this popular tax credit. Recent housing data suggests that the housing market is still struggling with pending home sales dropping nearly 8 percent. The drop in pending (contract) home sales and unexpected declines in purchases of new and existing homes last month, adds to evidence the housing market, at the center of the worst recession since the 1930s, is still struggling to rebound. Further, the government has been forced to roll out new measures to help struggling [COLOR=#0054a6! important][COLOR=#0054a6! important]homeowners[/color][/color] facing foreclosure. So the question a number of realtors, housing industry members and would be home buyers are asking is that will the home buyer credit be extended again past summer?

    Undoubtedly there is significant negative sentiment towards the home buyer credit, particularly from those home buyers who could not take advantage of previous versions with lower income limits; and from most conservative groups and fiscally focused politicians who want the home buyer tax credit to expire as planned. However, in addition to allaying the weakness in the housing market, extending the home buyer credit again could be a smart political move in an election year. Lawmakers, now more than ever, are looking for any successful mortgage and/or housing-related program that they can stand behind. Besides the Fed’s mortgage-backed securities (MBS) purchase program, the home buyer tax credit has been touted by some as an extraordinary success. Such, “success” can provide the necessary political cover to advocate extending the credit, especially since the simple fact is that it if doesn’t work — that is, if it’s not being utilized — that it costs nothing. Deficit issues and the concept of whether we’re rewarding those who might have bought anyway will take a back seat. Keeping home sales going promotes home price stability, and that makes for less-grumpy voters as election time rolls around.

    As of yet, there are only a few official rumblings about further extending the home buyer credit for new and existing home buyers. However, if the housing market and political climate continues to deteriorate I would not be surprised to see the credit extended again (albeit with slightly different conditions) to at least the end of the year.
    Carmen Arruda

  19. April 30, 2010 is rapidly approaching, and with it comes your final opportunity to take advantage of the Federal Homebuyer Tax Credit.*

    See if you qualify…before it’s too late:

    First-time buyers can qualify for an $8,000 tax credit!

    Move-up buyers can qualify for a $6,500 tax credit as long as you have lived in your home for five consecutive years out of the past eight years

    Income limits have increased to $125,000 per individual and $225,000 per married couple

    Buyers must enter into contracts written on or before April 30, 2010 and will have until June 30, 2010 to close escrow

    For certain military personnel, the credit has been extended an additional 12 months.
    Carmen Arruda

  20. You probably know that foreclosures are increasing dramatically on all types of properties, from vacation homes to commercial sites. Nonetheless, the boom in foreclosures probably is being felt mostly by homeowners.

    The prospect of your losing your home can be stressful enough. You might be trying to figure out a way to catch up on the mortgage to avoid foreclosure, or maybe trying to find a new place to live. While you’re concentrating on important things like that, it’s easy to overlook the tax consequences for home foreclosures, which may come as an unpleasant surprise.

    After the foreclosure is done, it’s possible to get a tax bill from the Internal Revenue Service (IRS). Whether you’ll get such a bill depends on a number of things, like:

    Was your mortgage a recourse or non-recourse loan
    Whether the foreclosure is treated as a sale of the property or the cancellation of a debt
    Whether the Mortgage Forgiveness Debt Relief Act of 2007 (MFDRA) applies to you
    Recourse or Non-Recourse
    If your mortgage is a recourse loan, you’re personally responsible for repaying the bank or mortgage company. If you don’t repay the loan, or “default,” the bank can sue you for the remaining amount due on your loan if the proceeds from a foreclosure sale doesn’t cover the amount you owe.

    On the other hand, if your mortgage is non-recourse, your lender can’t make you pay the loan. The only thing it can do is foreclose and sell your house for payment on the debt.

    Sale
    Regardless of whether your mortgage is recourse or non-recourse, the foreclosure is a taxable sale for you. This is true even if you give the lender a deed to your home in satisfaction of the debt, which is called a deed or transfer “in lieu of foreclosure.” Because the foreclosure is treated as a sale, you have to report any gain from the sale as income, and you’ll be taxed on that gain.

    You don’t get a deduction for any loss that you might have as a result from the foreclosure.

    Figuring a Gain
    As with any other sale, you figure your gain from the foreclosure by taking the difference between the amount realized from the sale and the adjusted tax basis of the home. Usually, your adjusted tax basis equals the price you paid for the home plus the costs of major improvements. The amount realized generally equals the gross proceeds minus expenses. In a foreclosure the amount realized depends a lot on whether your loan is recourse or non-recourse:

    For recourse loans, if your home is sold at a foreclosure sale, the amount realized is its fair market value, which is generally the sales price, minus expenses of the sale, such as court costs, legal fees and real estate commissions
    For non-recourse loans, your amount realized equals the amount you owed on the mortgage plus any interest that comes due up to the time of the foreclosure
    Cancellation of Debt
    Generally, if you borrow money from banks or credit card companies, and the lender cancels or forgives that debt, the amount of debt that was cancelled is income for federal tax purposes. The cancelled debt is “money in your pocket” because it was loaned to you and you don’t have to repay it.

    Until recently, the same logic applied to most recourse mortgages. After surviving the stress of foreclosure, many people were surprised by a tax bill from the IRS. Say at the time of foreclosure you still owe $200,000 on your mortgage, but according to the bank’s appraisal, the fair market value of the home is only $190,000. If you transfer the house to your bank in lieu of foreclosure and the bank doesn’t make you pay the $10,000 difference, or “deficiency,” then you have a $10,000 taxable gain.

    There are some exceptions. For instance, debts that have been discharged through bankruptcy aren’t considered taxable income. Similarly, if you’re insolvent – your total debts are more than the fair market value of your total assets – when the debt is cancelled, some or all of the cancelled debt usually isn’t taxable.

    In the case of non-recourse mortgages, there is no cancelled or forgiven debt. With these mortgages, the amount realized on foreclosure (or transfer in lieu of foreclosure) is never less than the outstanding debt. In other words, the price the property sells for at foreclosure is treated as the balance owed on the loan, no matter what the sale price may be.

    The Mortgage Forgiveness Debt Relief Act (MFDRA)
    Late in 2007, spurred by soaring home foreclosures, the MFDRA became law. Generally, it lets you exclude from your taxable income most if not all of any cancelled or forgiven debt that might come about because of a foreclosure. There are limits, however:

    The cancelled debt has to be on your principal residence. The debt can be from a loan that you took out to buy, build, or substantially improve your home, or for refinancing the mortgage on your home. Because it applies only to your principal residence, commercial and vacation properties usually don’t qualify
    Only debt that is forgiven in 2007, 2008, or 2009 qualifies
    If you file a joint tax return with your spouse, you can exclude up to $2 million of forgiven debt from your income. If you’re married and file separately, you can exclude up to $1 million
    You have to report the amount of forgiven debt on a special IRS form and attach it to your tax return
    If your forgiven debt doesn’t qualify under the MFDRA, don’t forget about the insolvency and bankruptcy exceptions noted above.

    Questions for Your Attorney
    If given a choice, should I choose a recourse or non-recourse mortgage?
    If I bid on my house at the foreclosure sale and win, can I still take advantage of the Mortgage Forgiveness Debt Relief Act?
    I’m trying my best to pay my mortgage on time, but it’s getting harder each month. Realistically, I don’t see how I can avoid foreclosure in late 2009 or early 2010. Given that the Mortgage Forgiveness Debt Relief Act won’t apply after 2009, do you think I should stop paying my mortgage now and force the bank to foreclose?
    Carmen Arruda

  21. Today is Sunday, April 11, 2010. Are there any updates for extending the $8,000 housing tax credit past April 30,2010/June 30,2010? Thank you.

  22. lorraine says:

    hi, friday april23,2010 are there any updates for extending the 8,000 housing tax credit post june 30,2010 to august 2010 e-mail back,ok.

  23. I am in a panic. I married in 9-09 and we filed married but separte on our 2009 taxes. Per the 5405 form if you file married but separte you can amend for $4000. But the problem is, the house is totally in my name (the bank told us it would be better to run everything off my much better credit) so my husband didnt technically buy a house. So are we out $4000? What can we do to get the full $8000?? Thanks

  24. Jeff B. says:

    I recieved my 8,000 dollar tax credit after ten months of waiting after I moved into my new home. A week after I got my tax credit, I got served forceclosure papers on my home. Would this still mean I will have to pay my tax credit back if I lost my home?

  25. alisa B. says:

    the first year the tax credit came out it was $7500.00 and you had to pay it back. I bought my home and received the 7500.00 tax credit oweing 500.00 for the next fifteen years. I just missed the deadline of paying it back by one week. but there are many of us that fill that this should be revised so we too get the same benifits as everyone else got.

  26. Purchased a home 2 years ago and received the $8000 tax credit. Then got married, created a child and need more room. Can I move-up to a larger home and not loose the tax credit? I would have to sell my home first.

  27. Hi to all, it’s actually a nice for me to go to see this site, it contains important Information.

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