$8000 First-Time Homebuyer Tax Credit Q&A
Post date: Jul 7, 2009 4:47:14 PM
Update: On May 29, U.S. Housing and Urban Development Secretary Shaun Donovan announced that the $8,000 first-time homebuyer tax credit described below could be applied to closing costs, including down payment in some cases. See final question below for more information.
A $789 billion economic stimulus bill signed into law by President Obama on Tuesday, Feb. 17, 2009, included a generous tax break for first-time homebuyers.
The law, called the American Recovery and Reinvestment Act of 2009, allows first-time homebuyers to get up to an $8,000 tax credit if they purchase a home between Jan. 1, 2009, and Dec. 1, 2009. Unlike a $7,500 homebuyer tax credit originally part of the Housing and Economic Recovery Act of 2008, the tax credit does not have to be repaid as long as the property is not resold within three years.
When do I need to purchase to qualify?
If you buy a home between Jan. 1 and Dec. 1 this year and close escrow during these dates, you will qualify for an $8,000 tax credit — as long as it is your primary residence and you meet the simple requirements.
How does the law define “first-time homebuyer”?
The law defines “first-time homebuyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase.
What are other requirements to qualify?
All U.S. citizens who file taxes are eligible to participate. An income limit of $75,000 a year for individuals and $150,000 a year for joint filers also applies.
How do I apply for the credit?
Taxpayers should use IRS Tax Form 5450 to claim the first-time homebuyer tax credit.
Does the credit have to be repaid?
No. Unlike a similar tax credit passed in 2008, this $8,000 tax credit does not have to be repaid to the IRS.
Can I use the tax credit toward a down payment or other closing costs?
Yes. An announcement made May 29 allows the tax credit to be used toward purchase costs of a home, including down payment in some cases. This can be done one of two ways. First, buyers using an FHA-approved lender can sell their anticipated tax credit to the lender and use the proceeds to immediately apply the tax credit to any down payment above the minimum down payment of 3.5 percent required with FHA-insured mortgages. Second, buyers who receive financing through state housing finance agencies and certain non-profits will be able to use the tax credit for their down payments via a tax credit advance loan that does not result in any cash back to the buyer. In both cases, buyers can only access the credit after filing their tax returns with the IRS.