Looks like the $8,000 Home Buyer Tax Credit is now signed, sealed and delivered.
Update: Everything you wanted to know about the 2009 home purchase $8,000 credit. (There is a similar link below for the 2008 $7,500 loan/credit)
Zillow reports it is a FULL $8,000 credit, even if the buyers total tax liability is less than that amount. “Buyers may not have owned a home for the past three years to qualify.”
CNN Reports That you can get your $8,000 faster by claiming it on your 2008 Return (or amended return if you have already filed), even though to qualify for this $8,000 non-refundable credit, you have to buy a house between 1/1/2009 and 11/30/2009
There is an income limit of $75,000 for single people and $150,000 for couples, though there are reports that people making over the limit might be able to get a partial credit.
If anyone has any details on the partial credit for people earning over the limits, please do let us know. Update: This answer is in the link at the top of this post.
For people who bought between 4/9/08 and 12/31/08
I don’t see any news so far that there are any changes for people who bought in 2008.
Good to hear most of the details are out. Now if only more people can get qualified for financing… Any idea if this credit can offset income or or asset requirements?
Ardell, please update the title of the posting to add “First Time” – or at very least mention it in the posting. This is only for first time home buyers, not for all home buyers.
Ardell do you ever allow an off subject post? I watched Howard Davidowitz today and there is no better analyst for “telling it like it is.” He expresses the facts and has been right on all his calls for the last 3 years. I find him very funny but his message is very very dire.
http://www.cnbc.com/id/15840232?video=1037869511&play=1
Ardell do you ever allow an off subject post? I watched Howard Davidowitz today and there is no better analyst for “telling it like it is.” He expresses the facts and has been right on all his calls for the last 3 years. I find him very funny but his message is very very dire.
http://www.cnbc.com/id/15840232?video=1037869511&play=1
gene,
Per the Zillow Blog link, the credit is for anyone who has not owned a home for 3 years, and I have added that in bold lettering. This detail and more details, are in the links included in the post. I’m not relying as heavily on details reported yet, and am hoping to be able to add a link to an IRS source ASAP, as I had in my previous post on the 2008 credit.
Not sure how long it will take the IRS to get their FAQs up on this, but since people can take the 2009 purchase credit on their 2008 return, I’m assuming they will get that up pretty quickly.
Ray,
You deserve a HUGE prize for not “self-promoting” LOL! So I will let your “off topic” link stand as a an olive branch to our continued friendship and mutual respect.
Ben,
I don’t see a relationship between the credit and income requirements. It’s possible a lender would consider permitting it to fulfill reserve requirements, but they may have to see the return or amended return, showing the amount as forthcoming.
It’s not a good idea for people to use the credit “to buy” a house. It would be a good idea to put the $8,000 aside as a reserve against future mortgage payments, in the event of illness or job less. For one of my clients, that $8,000 is equal to 4 monthly mortgage payments. A decent reserve position by lender standards.
Ben,
I don’t see a relationship between the credit and income requirements. It’s possible a lender would consider permitting it to fulfill reserve requirements, but they may have to see the return or amended return, showing the amount as forthcoming.
It’s not a good idea for people to use the credit “to buy” a house. It would be a good idea to put the $8,000 aside as a reserve against future mortgage payments, in the event of illness or job less. For one of my clients, that $8,000 is equal to 4 monthly mortgage payments. A decent reserve position by lender standards.
Nope no more self-promotion. Don’t need to anymore. Unless I get “challenged” like Sunday at The Home Show with some corn-ball Keller Williams Agent. She didn’t know what she stepped into when approaching me at our booth. She will NEVER forget and the next time she challenges a different model of real estate business she will be far more educated.
Do you think it will really help kick start more home sales? I know my friend is happy, since he should qualify for the credit since he hasn’t owned a house in about 5 years. I agree about stashing that money for a rainy day. This mess took years in the making and it will be some time before it gets any better. Knowing you had 8k towards your mortgage payments would be a nice reserve.
Not happy about the income limits though. At least around here, it isn’t the lower end of the market that is suffering. Plenty of financing and incentives for borrower’s with those incomes, particularly FHA financing requiring just 3.5% down.
However, where we need some motivation is at the higher end right around the $350-$600k price points.
Not happy about the income limits though. At least around here, it isn’t the lower end of the market that is suffering. Plenty of financing and incentives for borrower’s with those incomes, particularly FHA financing requiring just 3.5% down.
However, where we need some motivation is at the higher end right around the $350-$600k price points.
Charles #8,
I hope no one who wasn’t even thinking about buying a house, does so just to get the credit. I think it is to get people to stop waiting to buy, who already planned to buy. Yes, I do think it will be effective to that purpose.
Russ,
$550,000 with 20% down = loan of $440,000. A family using 3X income as a gude would just qualify under the $150,000 limit. There seemed to be some vague reference that people over the income limits had a reduced benefit. Anyone hear anything about that in detail?
Ardell,
You should change your terminology to “Refundable”. According to Zillow it’s a refundable credit, which means you get it regardless of your tax liability. a non-refundable credit means your tax liability gets reduced by the credit.
I’m researching the income limitations, hopefully I’ll get an answer for you.
Thanks Tor,
“non-refundable” means it doesn’t have to be paid back like the 2008 credit. “it is a FULL $8,000 credit, even if the buyers total tax liability is less than that amount.” addresses the point you are making.
Even CNN is correcting its story from the original version…so I think the basics are covered, and the terminology and ifs ands or buts should wait for an official FAQ list from the IRS.
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Hey ARDELL – I still wish it were $15k and not $8k and open to ALL. I do like that they are saying homeowners who haven’t owned in the last three years – better than true first time homebuyers in my opinion, but the income requirements see a bit low for our area at least.
Though the tax credit will help, I do not think it will make a “dramatic” difference. There are a ton a great deals out there right now, but despite that people are not buying because they are afraid, as they should be. The tax credit will encourage people to buy a new home, and because of that it is a good idea, but it will in most cases not enable them to. It will also not free up credit, a major issue now with most very large purchases (e.g. cars).
And lastly, with regard to any comments about “pork”, while I am a democrat, I do not agree with the majority of this spending. And I have also heard very little in the way of root-cause solutions from across the aisle. Most of congress is trying to help, but they are also doing what is politically advantageous.
Regards,
Michael McLaughlin, Cary real estate
Courtney,
This was in the Zillow post: “(Higher-income buyers may receive a partial credit.)” Still trying to find someone who has details on that.
The thing about the Seattle Area is that our prices didn’t start falling until about 2 years after the rest of the Country started falling. So these incentives are more to help places like AZ, FL, Vegas, etc who are experiencing considerably more damage than our area.
To some extent, we are just going along for the ride, and should be very grateful for the opportunity. If all of the Country were in the shape we are in, they wouldn’t be coming up with all of these opportunities for home owners and home buyers.
Not sure why this is so elusive to everyone. The details of the conference agreement are on pp. 16-18 (and have been here for over a week):
http://www.house.gov/billtext/hr1_cr_jesb.pdf
Chris,
That appears to be the old credit for 2008 purchases from 4/9/08 to year end, not the one we are talking about here.
NO. This is the conference report of the bill just signed into law. Look at the house version, the senate version and the conference version that is now law.
I’m interested in changing my tax withholdings to account for the $8000 credit. This is suggested as an option in the specifics of the credit. So, say I normally have about $450 a month taken out of my checks for FICA. Now, say I change my exemptions to 9 or 10. What would be the result? Would I have $0 taken out of my checks? Is it possible to not only have $0 taken out, but to actually get extra money on my checks due to having the high number of exemptions? Any responses would be much appreciated. This is all hypothetical, of course.
Doesn’t sound like a good idea. Better to take the $8,000 credit on your 2008 return and get the money now. Dangerous to switch your exemptions and then switch them back again in the next year. You’ll have to ask a tax preparer or the IRS direct. Your payroll division of where you work should be able to tell you how doing it would change your net pay, but not likely a good idea to falsify your exemptions.
Thanks Ardell. Why would it be considered “falsifying exemptions” when the specifics of the credit state the following:
“Question 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?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.”
“Answer: Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.”
Taken from the FAQ section of this “official” website:
http://www.federalhousingtaxcredit.com/2009/faq.php#20
You would only do this if you fully expect to close on a deal by the Nov. 30 deadline, obviously. It is a bit risky, however, there is nothing shady about it.
Gob,
Per my comment #6, I just think it’s a better idea to take that $8,000 and do something meaningful with it. If you just end up with an extra $150 a week in your paycheck, you’re more likely to piss it away. Plus, I know someone who did that, but never switched their exemptions back at the appropriate time, because they got used to the extra money in the paycheck, and ended up in a lot of trouble.
If you are doing it because you “plan to buy a house later”, you get locked into having to buy. God forbid you should lose your job or can’t get a mortgage, and you end up owing that $8,000 back to the IRS.
I’m not saying the IRS won’t let you…I’m just saying it’s not a good idea. It’s more “Mom” or “Nana” opinion. I treat clients like family and tell them the same things I would tell my girls. Then if they want to do something else, I help them do what they are trying to do.
If you have to pretend you have 7 kids to get the money in your paycheck…not a good idea. You get used to the paycheck that comes with having 7 pretend kids 🙂
I’m getting ready to buy a home just waiting on the paper work. Can i admend my 08 taxes and get the 8,000 credit after my closing
Mariah,
If you click on the link at the top of my article you will see this as FAQ Item #20.
The answer is you have the option of amending the 2008 return OR taking it on your 2009 return. There are many items in that link in the post itself you will likely want to check out.
“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?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.”
do you get this as a refund? or is it just credit? if it is a refund, then how long untill we recieved it?
Robin,
If you take the credit on your 2008 return by amending it, and have paid all of your 2008 taxes already, then the “credit” is a “refund”. Same difference. How long? It depends how you file it, I think. I’ve seen some “speedy refund” advertisements. But I really don’t know timeframe.
I have a client doing this and depending on the “credit/refund” for some repairs they plan to do when the weather gets nice. Around here that could be after July 5th, and they are confident they will have the money in hand by the time they want to do the exterior work on the house and deck.
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In 2009, I will certainly have a tax liability of $0 or very little. I am in a unique situation because I am recently retired, but have very little income with lots of cash. Does this mean if I buy a 80k+ house this year, I will receive a 8k check from the feds? also I think I can use IRA money (up to 10k) for the down payment without any penalty (just normal tax) even though I am < 59 1/2.
PC,
No comment on the IRA part of the comment. As to the $8,000 Homebuyer credit, your tax liability or lack thereof doesn’t seem to matter. Click the “everything you wanted to know” link in the post, and you will see the FAQs on the credit, including that you cannot have owned your prinicpal residence for the last 3 years. Remember, it has to be your home that you will live in, and not an investment property, and you must continue to own and live in it for at least 3 years. I believe that is what the FAQs will tell you, so please check that out fully.
What I find odd is that you would consider buying a house now, if you have not considered doing so in the past. Buying a house to get the credit, vs. buying a house to own it during your retirement, seems to be “off” thinking. But if you have not owned a home for 3 years and would feel better owning one at this time in your retirement, seems to me that you would qualify.
You can check with your tax preparer or agent before entering into a contract to purchase a home, but that’s my $02 FWIW.
PC,
No comment on the IRA part of the comment. As to the $8,000 Homebuyer credit, your tax liability or lack thereof doesn’t seem to matter. Click the “everything you wanted to know” link in the post, and you will see the FAQs on the credit, including that you cannot have owned your prinicpal residence for the last 3 years. Remember, it has to be your home that you will live in, and not an investment property, and you must continue to own and live in it for at least 3 years. I believe that is what the FAQs will tell you, so please check that out fully.
What I find odd is that you would consider buying a house now, if you have not considered doing so in the past. Buying a house to get the credit, vs. buying a house to own it during your retirement, seems to be “off” thinking. But if you have not owned a home for 3 years and would feel better owning one at this time in your retirement, seems to me that you would qualify.
You can check with your tax preparer or agent before entering into a contract to purchase a home, but that’s my $02 FWIW.
Thanks Ardel,
I live in AZ and did sell my house 3 yrs ago anticipating the real estate bubble. Little did I know that prices would fall this dramatically. I am ready to own again and the credit is a welcome bonus. I also checked the tax code for using ira money with no penalty and it is valid. http://www.fivecentnickel.com/2007/08/27/using-ira-funds-to-buy-a-house-good-or-bad-idea/
thanks again
PC,
Thanks for the link on the IRA funds and good luck to you!
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I have been working for the Dept. of Defense Schools for the past 8 years. I sold my house in Florida in 2002 when I took a positon with the DoDDS in Japan. I recently pruchased a house in Florida and closed Nov. 1, 2009. I only reside in the home during my summer vacation from June to August. Can I claim this as my “primary residence”? I live in a rented apartment in Japan paid for by the US quarters allowance. I do not own any other poperty in the in US. My friend stays at the house and maintains the property for me when I am not there. Do I qualify? My tax preparer H&R Block has said theat I may not qualify due to me living 9 months overseas.
Gerry,
It’s clear that vacation homes and rental property do not qualify. Seems you use it as a vacation home and if your friend pays you to live there, it would seem to be part rental property part vacation home.
Does your friend pay you rent?.
What other exceptions exist that might prevent me from claiming this tax credit?
There is definitely some “fine print” in this bill, and we urge you to consult a tax professional and/or IRS documentation to determine if it impacts your situation. Here are some examples of exceptions that will prevent you from claiming any tax credit:
The home purchase must be a principal residence – not a second home, investment home, or vacation home.
12. What exactly is a “principal residence”?
While the IRS has a variety of tax laws related to the purchase, ownership, and sale of a principal residence, a principal residence is never actually defined in the tax code. However, through a history of court rulings and IRS interpretations, there have emerged a variety of “tests” to indicate whether a home is a principal residence. Some examples of the key components that will guide and assist the courts and the IRS in determining a principal residence include:
Where do you pay your state & local income tax?
Where do you vote?
Where is the address on your driver’s license?
Where do you get your mail?
Where is your bank?
Where are the social & recreational clubs and other organizations to which you belong?
In terms of the actual types of homes that can qualify for a principal residence, it is a wide ranging list, as long as the home has a kitchen, sleeping quarters, and bathroom facilities. This can include detached homes, townhouses, condominiums, duplexes, semi-detached homes, attached homes, rowhouses, cooperatives, mobile homes, and even house boats
THIS IS FURTHER INFORMATION I HAVE FOUND….IF I RENT ANOTHER APARTMENT AND DON’T COLLECT ANY RENT FROM MY FRIEND THAT LIVES THERE THEN IT SHOULD BE CONSIDERED MY PRINCIPAL RESIDENCE.
“we urge you to consult a tax professional”
In the original comment you indicated that you did consult a tax professional who said you were not eligible.
The questions you noted all point to do you live, work and play from that “principal residence”.
The “tests” of prinicpal residence I have seen are when someone owns two homes and is trying to count the one in the more favorable tax locale as “principal”, and the test is often that you spend most or at least more of your time there.
That said, I know people who work on boats, fishermen, who spend much of their time on a boat. Their property purchase is a principal residence as they spend all of their time there when “not working”.
Is there a reason you don’t simply call the IRS and ask? I think if you lost your job (hope you don’t) that you would go “home” to that “house” evidencing that where you spend most of your time is simply “for work” like the fishermen.
I think you know it’s a gray area. You either have to find a tax professional who will do what you want, or you have to prepare your return yourself and hope for the best.
I think the fisherman that spends more of his time on a boat working, is the best analogy I can come up with.