The $15,000 home buying credit in the Stimulus Package seems to be dead.
This credit would have been for more than just first time home buyers and was generating a lot of increased activity over the last week or so both on the Internet and in open houses across Seattle. There have been many arguments both for and against this particular tax credit and over who would benefit from it the most, but in the end the Senate and the House had to come up with a compromise
The Compromise?
According to Los Angeles Times and the Associated Press, only first time home buyers “could
This is great news. It should have stayed for first time homebuyers as that is who we need buying up houses right now.
$8000 is still a nice chunk of change and thrilled that it appears that there is no repayment on it, but I think it would really help the housing market to have this expanded to more buyers.
I am looking forward, regardless, to seeing what is actually signed in the end!
Will there be any way to use this $8000 as a down payment? In other words, can you get this credit before you close on a house?
Hi Gob, Now that would be helpful! But, unfortunately, no.
Whatever number they do end up settling for is just a tax credit and can only be used to offset your tax bill. In other words, you can only use it to the extent that you are liable for income taxes to the IRS.
Courtney,
The 2008 version is not limited to “offsetting the tax bill”. That one is still in place as of today. You can have tax liability of $4,000 and still get the $7,500, but it’s a loan and they take back $500 each year for 15 years. Still NOT limited to “used to offset your tax bill”.
We don’t know what the new one is going to do yet, but the old one is still in place until June 20 of 2009, and you may get the choice of one or the other during the overlap of the bill Bush signed and the one Obama signed.
You should probably put links to my three posts on this on RCG at the bottom for the full story…though I’m not going to crunch the numbers until it’s final, and do my 4th post on it.
If someone’s tax liability is $4,000 each year for two years, and they let you spread the $8,000 over two years like the would have the $15,000, then there is no reduction in the credit. Even if someone’s 2008 tax total while renting is $6,000, once they deduct the mortgage interest and RE Taxes in the year of the return where they apply the credit, the reduced credit may still make them tax free.
If they make this one a credit limited to tax total, and the old one the full credit regardless of tax total (which you could take in 2009 even if you bought in 2008), I doubt most people will understand this without the help of a tax preparer.
It may well be that someone is better off with the 2008 version, if they have enough write-offs from other sources. We’ll have to wait and see if they have that option, once the bill is signed.
I will add the links and look forward to your final post on it. I also hate that they have done so much back and forth on this one with not much in the way of details, but there are so many people out there getting excited about the possibility of $15k and it just isn’t so as far as I can see so far…
I am hoping they do add some kind of low interest rate into this package as well…
Time will tell:)
The conference report is now available on http://www.cspan.org
The conference agreement extends the existing homebuyer credit for qualifying home purchases before Dec 1,2009. The maximum credit is increased to $8000 and waives the repayment of the credit for qualifying home purchases Jan 1, 2009-Nov 30, 2009. A 2009 purchase may be treated as occurring on Dec 31, 2008. If home is disposed of and ceases to be the principal residence within 36 months of purchase the present rules for repayment apply. The effective date: the provision applies to residences purchased after Dec 31, 2008.
I bought I house in May 2008, I know I can get the 7500 tax credit. Am I at risk of loosing this when the 8000 tax credit gets signed? All the info I can find on the new 8000 tax credit is that it starts on Jan 1st 2009.
Jane, thanks for listing the link – I am glad there is no repayment and I like the retro active idea as well to umbrella all of 2009.
Spiess, whatever gets finalized won’t take away what you already had. It will rather change it starting at the new date. Obviously, talk to your accountant after things get finalized by Obama.
If this goes through. Does anybody know if you have to pay back the $7500 tax credit they had before this one??
I do not expect the new bill to change anything for homes purchased from 4/9/08 to 12/31/ 2008. But it’s not over until it is signed.
$8000 is still nice and along with going back to the increased loan limits and providing cash for local governments to clean up some of the most depressed neighborhoods I think it is a step in the right direction.
Read on another website that the $8,000 home buyer credit is only $4,000 for single individuals. That is the only time I had seen that; hoping it is not true. Anyone know about this?
Christy,
Since it should be signed any day now, and the final bill has handwritten notes in it, it’s best not to speculate on the details for a few days.
Okay. I’ve been reading all over about this new housing tax credit. Some people say the $7,500 tax credit (the one that has to be repaid over 15 years) will PHASED OUT and replaced by the new $8,000 tax credit (the one that does NOT have to be repaid). I bought my house in May of 2008 and just filed my taxes and accepted the $7,500 tax credit (knowing that I have to repay it). Will I be able to replace the $7,500 tax credit with the new $8,000 tax credit and not have to pay it back? Some are saying it’s only for people who buy homes in 2009. Some say it will replace the $7,500 tax credit ! Which is true? Where can I find some CONCRETE info. on this? I’m not complaining, I just want to know the real answer. Obviously the difference between repaying 7,500 and getting 8,000 for free is HUGE. If anybody has answers, I’d appreciate it. Thanks.
Hi Mike – Just hang tight another day or two! ARDELL is going to do a follow up post right here with all of the concrete specifics once this gets signed. It has gone back and forth so much, but I wanted to make sure buyers knew that it was not $15,000 anymore. Check back in another day for more details.
Mike,
Today’s “real” answer is that you did it correctly. There is going to be a NEW “real” answer after Obama signs the new bill, and not before. I do not expect any changes for people who bought in 2008.
What you are hearing about the new bill replacing the old one, is only supposed to cover people who buy in 2009. We’re not sure if it will be retroactive to 1/1/09 or only be for people who buy on or after the day the bill is signed. But we don’t expect it to go into 2008.
There are some advantages to the 2008 version, one being that the $7,500 loan is not reduced to total tax amount for buyers in 2008, the way we expect the new credit to be capped. Possibly something to feel good about 🙂 As Courtney said, I’ll write my 4th and final post, after the bill is signed. Last I saw the bill it had hand written changes in it, so I wouldn’t trust any “final” versions until Obama signs it.
Until then, you appear to have handled it correctly and I assume you checked that with your tax preparer as well. You can always call the IRS direct, but as far as I know, no one has any info other than the instructions you were given by the IRS with your current return.
Mike,
Today’s “real” answer is that you did it correctly. There is going to be a NEW “real” answer after Obama signs the new bill, and not before. I do not expect any changes for people who bought in 2008.
What you are hearing about the new bill replacing the old one, is only supposed to cover people who buy in 2009. We’re not sure if it will be retroactive to 1/1/09 or only be for people who buy on or after the day the bill is signed. But we don’t expect it to go into 2008.
There are some advantages to the 2008 version, one being that the $7,500 loan is not reduced to total tax amount for buyers in 2008, the way we expect the new credit to be capped. Possibly something to feel good about 🙂 As Courtney said, I’ll write my 4th and final post, after the bill is signed. Last I saw the bill it had hand written changes in it, so I wouldn’t trust any “final” versions until Obama signs it.
Until then, you appear to have handled it correctly and I assume you checked that with your tax preparer as well. You can always call the IRS direct, but as far as I know, no one has any info other than the instructions you were given by the IRS with your current return.
Courtney,
Explaining to people that the $7,500 was not limited by total tax amount and the $8,000 is, so that $7,500 IS $7,500, but $8,000 may be less, and in most cases will be less, is going to be real hard for the average person to understand.
I hope they make this thing less complicated than I expect it to be. Crossing my fingers.
Courtney,
Explaining to people that the $7,500 was not limited by total tax amount and the $8,000 is, so that $7,500 IS $7,500, but $8,000 may be less, and in most cases will be less, is going to be real hard for the average person to understand.
I hope they make this thing less complicated than I expect it to be. Crossing my fingers.
To clarify how a tax credit works in this instance, I have personally prepared several tax returns for people who qualified for the credit through this program. A tax credit is just that. It is not the same as a tax deduction. And, to the extent that the credit exceeds your tax liability (i.e., your taxable income multiplied by your tax rate per IRS tax tables), you will see that money in your pocket. Works the same as the Earned Income Credit – you get every dollar put into your pocket. This is a great opportunity for those with a large unpaid tax liability for 2008 (i.e., if you didn’t pay enough through your 2008 withholding on your paycheck) to reduce what you may owe – if you just go buy a house! Something for self-employed’s to think seriously about if you haven’t owned a home that you’ve lived in for 3 years. Beautiful thing is you’ve got until year end 2009 to make this retro to 2008 tax year!
If I understand this right a new homebuyer is someone who hasnt owned in the past 3 years. I last owned a home on June 30, 2006. I am in the finishing stages of building a new house. Do I need to wait until June 30th to meet the 3 year rule or can I end my construction loan when I am done in say 2 weeks? Obviously, financially if I have to wait until June 30th it still makes sense for $8,000.
Good points Crystal,
I would point out that while you have until “year end 2009 to make this retro to 2008 tax year”, I think you only have until 11/30/2009 to close on the house.
Richard – you need to talk to a tax accountant, but 3 years is 3 years and not 2 years and 9 months. I don’t think the fine details of possible exceptions is ever available in generic form. So talk to the IRS or a tax accountant. I’d give them a week or two to get the details down, but I see no reason why they would make an exception for less than 3 years.
I agree with ARDELL – I think that in your case Richard, it could be tricky – I would definitely talk to a tax accountant.
I am still wishing it were $15k:)
I agree with ARDELL – I think that in your case Richard, it could be tricky – I would definitely talk to a tax accountant.
I am still wishing it were $15k:)
Became a First time home buyer in December 2008.
Talk about bad luck
Courtney and Ardell,
I’ve been hearing conflicting information about whether or not the new $8,000 credit will be retro-active to the 2008 tax year, meaning, “If I buy a house now, can I claim the credit on my 2008 taxes?”
My accountant and mortgage officer say they have not seen the final bill yet but believe the answer is no. Several newspapers (and the comments in this post) seem to indicate yes.
Have you seen the final bill and do you have a definitive answer to that question?
Thanks,
Ben
Hi Ben,
I had heard the same thing, but absolutely can not find that in the final documentation which you can look at here:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1enr.pdf
The part about the $8000 credit begins on page 202, FYI:).
I would rely on your accountant for that one and plan on taking it on your 2009 taxes, but if anyone has a different answer let me know.
Hi Ben,
I had heard the same thing, but absolutely can not find that in the final documentation which you can look at here:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1enr.pdf
The part about the $8000 credit begins on page 202, FYI:).
I would rely on your accountant for that one and plan on taking it on your 2009 taxes, but if anyone has a different answer let me know.
Hi Ben,
This is Courtney’s post, so I don’t update it as to new info, but if you look at my 3 posts on the subject, and my recent post on the subject (dated later than this one) there are FAQs out for (and linked therein) on both the 2008 and 2009 versions. I have updated all of my posts on the subject.
The confusing part is that they are giving options with regard to when someone can take the credit. But the provisions cut at 12/31/08 for which credit you can take. I don’t read “the Bill” since the FAQs answer all of the questions and I am not a tax accountant. Usually even accountants get an advisory/summary of the Bill.
Cut and dry, if you closed on a house between 4/9/08 and 12/31/08, you get the $7,500 must be paid back “credit. If you buy a house between 1/1/09 and 11/30/09, you get the $8,000 version that does not have to be paid back. Less for a single person, income restrictions, lots of other ifs ands or buts, all of which are in the links.
Odd scenarios like someone building a house, people buying homes together who are not couples, and any other situation not clearly spelled out in the FAQs, need specific advices from tax professionals.
I’ll try to post a link to my most recent post with the up to date FAQ links below. I’m working “on laptop without mouse” which makes it a little harder, but I’ll give it a shot.
http://www.raincityguide.com/2009/02/17/8000-homebuyer-tax-credit/
Courtney and I “crossed wires” a bit by posting on the same topic. We’re doing our best to reduce the confusion 🙂 Courtney, from what I am hearing, most people are not taking either year’s credit on “2009 taxes”. They are taking it on 2008 returns either directly on the one to be filed in 2009 or by amending one already filed in 2009. But most are taking it on the 2008 return.
Exception are those who want to take the increase in pay of anticipating a purchase by 11/20/2009, which has not yet happened. That is an option, but I don’t recommend it.
AD – Congrats on owning your own home!
Timing is everything – did you get a good price at least? I wish they would have made it retroactive and replaced $7500 all together for 2008 purchases, too.
Hi ARDELL – yes we did! LOL I put my foot in it! I like your FAQs:)
is there any mention of credits when building a house?
We are about to close on our first home in 24 days. Our realtor said we should take the 8000. now.. basically ammend our taxes..
HOW do we do that and is this a good idea?
We are about to close on our first home in 24 days. Our realtor said we should take the 8000. now.. basically ammend our taxes..
HOW do we do that and is this a good idea?
Hi Leslie – I thin kyou would need to talk to a tax professional to get specifics on your situation.
Dwayne & Suzie – You can ammend your taxes, but if it were me, I would just wait – depends on whether you need the cash or not. I personally would not want to have to deal with ammending my tax return, but on the other hand cash is king:)
Courtney,
I believe there are only two ways to take the credit from a Federal perspective. One is to file a return or amended return AFTER the closing date. The other is to amend your deductions and take a small % of the credit in advance of purchase.
I do not believe the rules permit you to get the full $8,000 before you purchase a property (except via other programs if they pass, like the new WA adance the $8,000 proposal).
I believe the agent advice to Dwayne and Suzie is incorrect. If it were possible to get the $8,000 via amended return prior to purchase, WA would not need to be considering a program to advance those funds by other means. I don’t agree that the should…but that’s another topic.
Courtney,
I believe there are only two ways to take the credit from a Federal perspective. One is to file a return or amended return AFTER the closing date. The other is to amend your deductions and take a small % of the credit in advance of purchase.
I do not believe the rules permit you to get the full $8,000 before you purchase a property (except via other programs if they pass, like the new WA adance the $8,000 proposal).
I believe the agent advice to Dwayne and Suzie is incorrect. If it were possible to get the $8,000 via amended return prior to purchase, WA would not need to be considering a program to advance those funds by other means. I don’t agree that the should…but that’s another topic.
ARDELL – good clarification and exactly what I think , too.
So with all said & done can you use the difference from the 15.000 on your 2009 taxes if you used the 8000 minue your tax liability on your 2008 taxes. So use maybe 7000 on 2009?
Just wondering if anyone knew anything about that tax credit law changing anytime soon. I heard they were gonna include everyone and not just 1st time homeowners. Please let me know. Thanks.
1)Angela there is no $15,000 credit at present.
2)Diana – too soon to speculate but…as it is proposed at the moment (and subject to change) It will not be for “all”. It will exclude 2nd homes and investors. Must be primary residence, just not 1st time IF that is passed, and that’s a very big IF. Also they are saying “$15,000” BUT…big but coming…limited to the amount of tax you owe (unlike current credit) spread over two years.
Lot’s of speculating going on…most think the current credit will be extended, many think it will expand beyond 1st time buyers, the rest is very, very iffy.
I feel the credit should extend to those people who had their houses ripped out from under them. Not everyone who had a foreclosure in the last couple years was an irresponsible person that took out loans they couldn’t afford. Some of us had circumstances, be it due to illness, loss of jobs, “teaser rate loans” etc…
2009 Tax credut questions:
1) What if one is on disability, pays no taxes, do they just get a $8,000 check when they file their returns?
2) I heard that one can ammend their 2008 Tax filing and get the $8,000 in 2009.
Any input.
Dan,
I believe the answer is yes on both. The credit is not dependent on taxes paid in, and 2 is a definite yes AFTER you buy a house, not before.
Check the FAQ’s on the IRS site or look at the Form and instructions (think it’s 5405) to be sure, but looks like you are OK on both counts to me.
That’s assuming you can buy a house, of course 🙂
Dan,
I believe the answer is yes on both. The credit is not dependent on taxes paid in, and 2 is a definite yes AFTER you buy a house, not before.
Check the FAQ’s on the IRS site or look at the Form and instructions (think it’s 5405) to be sure, but looks like you are OK on both counts to me.
That’s assuming you can buy a house, of course 🙂