2009 $8,000 "1st time" buyer credit

IMPORTANT UPDATE!  Bill signed on 2/17/2009.

Original post below:

Back in October, I wrote this post about the repayment feature of the 2008 $7,500 1st time buyer “credit”, including this link to more information as to who qualifies, and the terms of the “credit”.

Yesterday on Twitter I noticed Ryan Hukill’s post referencing Kenneth Harney’s article suggesting that:

“… Congress might be on the verge of transforming it into a true tax credit — one that never has to be paid back…” for purchases made on or after 1/1/2009.

I personally don’t see how changing the repayment terms for people who bought houses last year can be part of a “stimulus” package.   Posting this so that people who are eligible for the credit are aware that there may be a change in the repayment feature. (update: Apparently Obama agreed with me, as there does not appear to be a change in the repayment feature for homes bought from 4/9/08 through 12/31/08 and the 2008 $7,500 Loan/Credit.)

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: ardelld@gmail.com cell: 206-910-1000

26 thoughts on “2009 $8,000 "1st time" buyer credit

  1. I was surprised by this sentence at the end of Harney’s piece”

    “If you pass all these tests and buy the house by whatever deadline Congress decides as part of the final stimulus package, you should be able to take $7,500 off your federal tax bottom line and not worry about ever paying it back.”

    Seems he feels it is a fete accompli. There is also mention that NAR is pushing for the end date to become 12/31/2009, but no mention of whether the revision as it now exists, includes both the no pay back provision and the 12/31 extension. My guess is it does, or by the time they pass it, the window for people to buy under the new provisions would be very short.

    The mention of the amount of home purchases they expect to stimulate with the package is 202,000. Not sure if that is through the current deadline or through 12/31/2009.

    I guess they feel if they change it to a no pay back provision to encourage future sales, it would be too confusing for some people, under the existing provision, to have to pay it back, and others not. Though I would suggest that they let 2008 treatment stand as is, and only apply any retroactive feature in the new package back to purchases made on or before 1/1/2009 with a 12/31/2009 end date.

  2. Ardell
    Always assume Congress will do something that will attempt to make themselves look good while actually accomplishing nothing. Unfortunately our government is more concerned with appearances than actually doing someting concrete. That being said, making the $7,500 a real credit rather than an interest-free loan will help some folks buy. The problem in my area San Francisco Peninsula is that the income limits on the credit will only work for first-time entry level condo buyers. So it never will be much of a spark in my market.

  3. Arn,

    It’s a shame that it can’t be modified per State, to attack the part of each market that is the weakest. I guess local governments would have to come up with their own tax incentives to impact local markets.

  4. Rhonda: I agree, this is craaazy.

    Ardell: Or a novel approach might be to let prices find equilibrium rather than artificially inflating them (again) with “free money”.

  5. Ardell,

    I didn’t say “let’s not have a stimulus for the economy at all” – I said lets not just give away money for free. Investments in energy efficiency, science/R&D, education, infrastructure (especially say mass transit), etc. will all help stimulate the economy, create jobs, and act as longer term investments. Letting people out paying back a (no interest!) loan seems to fly in the face of the call for more responsibility that our new President made in his inauguration speech.

    If you want to donate some of your hard earned money to help someone buy a home, please feel free to. I’d rather my tax dollars go to more productive pursuits that will have a longer term positive effects on more people, the economy, and the planet in general…


  6. Gene,

    Clearly the economy needs for more people to buy houses. I think ignoring that fact is not responsible. I would definitely support, at minimum, extending the current program through year end.

  7. Ardell,

    People will buy houses when prices get back to affordable levels. I have no issue at all with the interest free loan of the current program. The government is lending to banks for essentially 0% on short term loans, so extending that to homeowners is fine – since the spreads are still higher than they should be.


  8. I looked up the text of the bill on the US House website, and it looks like the provision would only apply to purchases made in the first half of 2009. See section 1301.

    In other words, anyone taking the credit for a purchase last year would have to pay off the credit as a loan over 15 years. On the other hand, a purchase on Jan 1,2009 would have the credit forgiven.

    Assuming this becomes law, what a compliance nightmare for the IRS.

  9. Thank you! It wouldn’t be a nightmare, except for the fact that a 2008 purchase can be claimed in 2009, buyers choice according to current rules. If all 2008 purchases had to be claimed IN 2008 and were subject to repayment, and all 2009 purchases had to be claimed in 2009 and were not subject to repayment, that could be handled fairly simply. But this “take the credit in either year, regardless of the year of purchase”, makes no sense at all, and will make fielding the 2008 purchases claimed in 2009 next to impossilble.

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