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What Is the First-Time Homebuyer Credit?

Ask Savvy: What Is the First-Time Homebuyer Credit?

Dear Savvy,

My ears definitely perked up when I heard about the stimulus measure giving homebuyers an $8,000 tax credit. I immediately had a bunch of questions, like could I buy this year and count it for my 2008 return? If I paid less than $8,000 in taxes can I still get the full amount? Is it really a credit or, like so many things, is it actually a loan?

To see my answer


Savvy says: Because there have been so many questions surrounding this issue since it was included in early stimulus proposals, the best way for me to answer is to give you a breakdown of the facts. Here's what you need to know about the homebuyer credit that was signed into the economic stimulus bill yesterday.

  • First-time buyers can claim a credit worth $8,000 or 10 percent of the home's value, whichever is less.
  • The amount can be claimed on your 2008 or 2009 tax return. If you already filed your 2008 return, simply file an amendment.
  • To qualify as a first-time buyer in this scenario, you must not have owned a home for the last three years.
  • The purchase must be made between Jan. 1, 2009 and Nov. 30, 2009.
  • You'll only have to pay back the $8,000 credit if you live in your new home for less than three years.
  • If you make more than $75,000 as a single person or $150,000 as a couple, you won't qualify for the full credit.
  • The question isn't how much you paid in taxes, but whether you owe or will receive a refund. Either way, you'll get the $8,000: If you owe money that amount will be deducted from the $8,000, and if you're getting a refund that amount will simply be added to the $8,000.
  • Unlike an earlier version of the measure that was rejected, this is actually credit — it is not a loan.


Join The Conversation
thelorax thelorax 8 years
Absolutely, Ladytron! I'm not at all pleased that I waited and saved up for my down payment and kept my credit report spotless to buy a home I can actually afford, and now I get to bail out those irresponsible goons who bought $500,000+ houses, plus a luxury car, a swimming pool, and a boat with $0 down and oh look, now the house is worth $250,000 and they owe $600,000 and I get to help pay the bill to save their butts! Yay.
Ladytron7000 Ladytron7000 8 years
Spectra, another problem with your husband's plan is that you can't make 3 years pass by Dec. 1. Don't bank on this credit becoming permanent. It's supposed to be a temporary stimulus of the housing market.
Ladytron7000 Ladytron7000 8 years
You want to talk about what's unfair? What about all the people who bought houses they couldn't afford, are now going to get gov't subsidies, and keep the profits, if any, when they sell. But responsible people who bought houses they can afford get nil. That's inflating the housing market. Foreclose and rent.
T-S T-S 8 years
Spectra, the credit is for $8000 or 10% of the home sale price, whichever is less. So, you'd have to exchange at least $80,000.
Spectra Spectra 8 years
So my husband heard about this $8K credit last night and he has this brilliant "idea" that I KNOW we would never pull off: Have his brother in Milwaukee (a first-time home buyer) "buy" our house but not move in or anything; just put his name on the deed/mortgage. Then, after 3 years, he "sells" it back to us. We'd split the $8K and use part of it for the closing costs. I think the IRS would catch on to that, but I wonder how many people are going to try that one.
thelorax thelorax 8 years
I'm so sad about this, I closed escrow in February 2008, so I'm not eligible for the $7500 loan OR the $8000 credit! Boo! :-(
T-S T-S 8 years
I don't understand why people who bought last year are so pissed. How about the people who bought the year before and got nothing? It's a free loan, stick it into a CD and make money off the interest while you have it. For every new tax credit, there have to be cut off dates. We can't just go back and give everyone who bought property ever $8,000. And besides that, it seems like if you really wanted to be safe, you could have waited to see what the new administration and congress would come up with. Otherwise it's like buying an iMac right before Macworld. You know that's usually when they come out with new stuff, so why not wait?
Liss1 Liss1 8 years
Oops, sorry i was so annoyed i clicked twice
Liss1 Liss1 8 years
This pisses me off! We just filed for the 2008 first time homebuyers credit of 7,500 but we have to pay it back! This isn't fair and i hope it gets changed so we don't have to pay it back either :(
T-S T-S 8 years
Brandy, my guess is no since it has to be your primary residence, so unless you're planning on putting up a tent... ilanac, I don't know if your situation makes you a non-first time homebuyer (my guess would be yes, but I'm not sure) but your fiancé would still qualify. If two married people are buying a house and one person is a first time buyer and the other is not, you don't qualify. If two unmarried people buy a house together and one person is a first time buyer and the other is not, then you do.
ilanac13 ilanac13 8 years
this is so frustrating. here's my question, i own a property, yet i'm not the full owner, my mom is actually the primary on it since i couldn't qualify for a mortgage on my own when i bought my house. does this mean that i can't get a credit if my fiance and i buy a house? am i still not considered a first time home buyer? i wonder how that works...anyone know?
verily verily 8 years
Well, I guess I'm in luck for deciding last year to hold off on buying a house for a year. I was planning to purchase a house by November, so I'll just have to make sure it closes around the 1st to be safe.
Oops, *in this as well?*
Is property/areage included in this as?
T-S T-S 8 years
You get the actual money. If your tax return refund would have been $1,000, it would be $9,000. If you were to owe $1,000 when you filed, you'd get a $7,000 refund.
aimeeb aimeeb 8 years
If only I had the money..alas this still confuses me... Do you get the actual money or does it go towards your loan?
Modus-Vivendi Modus-Vivendi 8 years
Oh, wow. I am renting now. Maybe I will need to take another look at the market (and my checkbook) this year.
Spectra Spectra 8 years
Dang, now I'm kinda wishing we would've held out longer before buying our house. We bought our house in 2007, so I know we don't qualify for this credit. Eight grand would definitely be niiiice.
GlowingMoon GlowingMoon 8 years
"Glowing Moon, no. Homes actually purchased in 2008 do not qualify for the new credit. However, if you buy a home after January 1, 2009, you can still put the credit on your 2008 tax return as though you bought it on December 31st, 2008." Oh. Okay, thanks.
jrosenberg02 jrosenberg02 8 years
Boo - my husband and I make too much to qualify. We should get to deduct our law school loans from our incomes!! $8k is an INSANELY high credit!
T-S T-S 8 years
er, it seems they have since updated it. It made me so mad I started abusing homonyms!
T-S T-S 8 years
Glowing Moon, no. Homes actually purchased in 2008 do not qualify for the new credit. However, if you buy a home after January 1, 2009, you can still put the credit on your 2008 tax return as though you bought it on December 31st, 2008.
T-S T-S 8 years
Oh! I think I sent that. Back when it was going to be $15k. I found this website to have the best info, but it didn't go live until after the package was signed: I was absolultely livid to see this article on CNN Money wrongly saying that your credit is somehow tied to your withholdings:
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?" Not exactly. Billings won't get $8,000 on top of his current refund, but he would turn that small refund into a much larger one. If his total tax liability came to $6,000, but he had $7,000 withheld from his payroll, he would normally receive a $1,000 refund. With this credit, his refund would total $8,000. If the credit were non-refundable, as was originally proposed in the Senate version of the stimulus package, he would have only received $6,000, or the total amount he paid in.
It seems they have sense updated it, but the ridiculousness of that statement made me pretty mad.
GlowingMoon GlowingMoon 8 years
"The amount can be claimed on your 2008 or 2009 tax return. If you already filed your 2008 return, simply file an amendment." Renee & Death, you still qualify, don't you? File an amendment, right?
death-by-chocolat death-by-chocolat 8 years
Ah boo, I closed in Oct 08! I would have been eligible for the full $8000, too. Lame.
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