Scrizzle: New Homeowners Can Get Up To $8000

First-time home buyers can get a tax credit of up to $8,000 thanks to the stimulus bill Obama signed back in February. You qualify if you bought between April 9, 2008, and November 30, 2009. To get the credit, use IRS Form 5405, “First-Time Homebuyer Credit.” Since house prices are going down, the credit isn’t anything to go and sign for a new crib this afternoon. But if you already got a home or were planning to, it’s extra jingle in your coin-purse.

Expanded Tax Break Available for 2009 First-Time Homebuyers [IRS]
(Photo: sssteve.o)

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  1. Anonymous says:

    The IRS announced Feb. 25 that for first-time homebuyers who purchase in 2009, the maximum credit is $8,000 and can be claimed on a buyer’s 2008 federal tax return.

    The credit is claimed using Form 5405.

    For first-time homebuyers who bought in 2008, the maximum credit is $7,500 and must be paid back over a period of 15 years.

    http://www.irs.gov/newsroom/article/0,,id=204671,00.html

  2. K-Bo says:

    If you bought between April 9th 2008 and December 31, 2008 it is actually $7500. It must be repaid over a 15 year period starting 5 years after you buy, or when you sell, whatever comes first. $8000 is for first time home buyers in 2009, and does not need to be paid back.

  3. Skankingmike says:

    Credit*

    not a rebate, you have to pay this back.

    Why would you do this?

    • HarcourtArmstrong says:

      @Skankingmike: Exactly, it’s not really a credit, it’s a no interest loan for 15 years.

      Granted, a no interest loan is technically free money, just not as much as you think it is.

      Ben, get it right or pay the price!

      • joshua70448 says:

        @HarcourtArmstrong: If you buy a house between Jan 1 and Dec 1, 2009, it’s a refundable credit that you never pay back. It’s only people that bought in 2008 that have to pay it back. But I agree, this article isn’t very well-written and should be clearer on that fact. Form 5405 is confusing enough as it is. ;-)

    • chiieddy says:

      @Skankingmike: It’s a good loan if you’re going to invest it back into the house. It’s certainly better than a HELOC or HELO and considering no one can get those right now, it’s especially good. However, if ONE of a married couple entered in with property and then subsequently both subsequently buy a property together, neither are eligible for the credit. For example, I own a condo. It’s in my name only (because it’s expensive to change names on titles) and I got married. My husband has never owned property. If we sold my condo and bought a house, we’d be ineligible.

    • peachplum says:

      @Skankingmike: You don’t have to pay it back if you lose value on your house, which I bet many people have.
      So if you sell your house for 7500 less than you purchased, it’s a wash. (Minus closing costs, realtor’s fees, etc.)
      A nice safety net for some.

      • Skankingmike says:

        @peachplum: I read that no where on the site

        Some exceptions apply to the repayment rule:

        *
        If you die, any remaining annual installments are not due. If you filed a joint return and then you die, your surviving spouse would be required to repay his or her half of the remaining repayment amount.
        *
        If you stop using the home as your main home, all remaining annual installments become due on the return for the year that happens. This includes situations where the main home becomes a vacation home or is converted to business or rental property. There are special rules for involuntary conversions. Taxpayers are urged to consult a professional to determine the tax consequences of an involuntary conversion.
        *
        If you sell your home, all remaining annual installments become due on the return for the year of sale. The repayment is limited to the amount of gain on the sale, if the home is sold to an unrelated taxpayer. If there is no gain or if there is a loss on the sale, the remaining annual installments may be reduced or even eliminated. Taxpayers are urged to consult a professional to determine the tax consequences of a sale.
        *
        If you transfer your home to your spouse, or, as part of a divorce settlement, to your former spouse, that person is responsible for making all subsequent installment payments.

        If you sold your home after just buying for a loss i guess you don’t’ have to pay it back.. but why would you buy and sell a home for a loss in the last 6 months?

        • joshua70448 says:

          @Skankingmike: The third point you posted states that when you sell your home for no gain or for a loss, you can reduce or eliminate the repayment amount. Since the 2008 credit is on a 15-year repayment schedule, if you sell your home at any time in those 15 years, you have to pay back the remaining part that you owe, unless you sell for no gain or a loss, in which case you can reduce your repayment.

    • TorrenceCat says:

      My fiance and I took the credit. At the least take the money, stick it in a interest-yielding account, make the interest, and pay it back with the money you took. Just doing that would make you some money in the long run. I believe you don’t have to start paying it back until your 2010 taxes, i.e. 2011. That gives you time to gain interest if you want to.

      Conversely, I don’t see why you wouldn’t take the money. If you’ve got a house chances are you’ll nullify the $500 you owe every year with a $500 refund.

  4. burnedout says:

    It’s horsehockey – my husband and I bought in June. If we’d known about this we would have waited until January.

  5. LuckyLakey says:

    So what about the homeowner who has made his/her mortgage payments on time and is doing more than their part to keep the economy stable. It feels just like a cellphone company. They’ll do whatever it takes to get you in the door but once you’re in they could care less about you.

  6. pb5000 says:

    I closed on new years eve 2008, I just missed the $8000 one but took advantage of the $7,500 one I now will be paying back over the next 15 years. eh at least it’s interest free.

  7. K-Bo says:

    The vanguard page seems misleading. Here are pages with info that seems less misleading.

    For 2009 buyers: [www.federalhousingtaxcredit.com]

    For 2008 buyers: [www.federalhousingtaxcredit.com]

    • Adam Rock says:

      @K-Bo: Thanks, that explains things a bit nicer.

      Turns out my wife is eligible for it in her 2008 return, but next year when we file jointly we won’t be eligible.

      We need the money now for a house we’re buying in April, which is perfect!

      We had no idea we could use it in our 2008 return until now!

  8. potzertommy says:

    your links lead to the old “must be repaid” tax credit. This one doesnt need to be repaid and can exceed your tax liability (and is $500 more than the old one!)

  9. KyleOrton says:

    @luckylakey

    Actually, the $8000 IS for you. The idea is that by bribing first time buyers to spend more than they should (and it’s no surprise that at least a few will overspend $20k to get 8), they’re half-heartedly trying to prop up the value of your home.

    If you just bought a home to live in and don’t track your equity week-by-week or expect to sell for a profit every 3 years then it doesn’t do much for you. But then you already know you’re much better off than your neighbors anyway.

  10. moore850 says:

    Again, the “credit” only works for houses this year, if you bought from april 2008 to jan 2009, you can get a “tax free loan” of up to $7500 per the irs page.

  11. Adam Rahuba says:

    My fiance and I were given a house this past summer, however, it remains in her parents name. Do you think we could have them “sell” us the house for $1, and get the credit?

  12. WIgopher says:

    My wife and I had been planning for a year or so to buy our house when our apartment lease runs out this June…we close on our house in two weeks. I was first informed of this back in October when my friend and his wife bought their house. Last night the four of us went out to dinner and he asked if we were going to take the 7500$ loan…I told him ours was going to be $8000 and I didn’t have to pay it back…he was pissed. They could have waited until January to close on their house but decided to just cut the apartment lease early. While I’m thrilled that I’m getting a free $8000, I still think it sucks that people who bought in 2008 have to pay it back since I no longer do.

  13. Dullboy30 says:

    My accountant told me he thinks it’s highly likely that the IRS will not want the extra paperwork, and will make the $7,500 credit into a rebate like the new $8,000 law.

  14. PriceIsWrong says:

    I took advantage of the $7,500 to make energy efficicy updates to my house we got in October of last year. Yeah, I have to pay it back over the next 15 years, but that’s $500 a year, and easily doable thing depending on how much you pay in taxes anyway.

    At least at this point, I will be able to use that money to lower all of my monthly heating and electric bills, which will go well and beyond the $500 a year I’m going to be paying back.

    For the past few months of gas heating (Nov & Dec & Jan) it cost me nearly $700. Absolutely ridiculous. After the seeing that I switched to firewood.

  15. chrisgeleven says:

    @Adam Rahuba

    Actually, no, you cannot do that. This credit specifically disallows any people who buy from close relatives from claiming this credit.

    Stinks, I am in a similar situation but instead for 2008 and I bought from my father-in-law a condo for far more then $1.

  16. GavinEstecado says:

    Dullboy, I sure hope so, I bought back in November and have been REALLY looking forward to something like that to be released… but a 7500 interest free loan is better than nothing…use that to buy off my credit card and some student loans that are interest bearing.

  17. K-Bo says:

    @Dullboy30 My accountant thinks so too. I think the reason they didn’t include it in the same bill was to keep the $ value of that bill down since it was so closely watched. They will probably sneak it in on a less publicized bill.

  18. Anonymous says:

    It should be noted that participation in several state’s Bonded first time home owners programs disqualify you for this program (7500 one at least). Don’t try to double dip. Call your states housing authority if you participated in a state first time homeowners program to receive money towards closing costs and aren’t sure if you qualify or not.

  19. OmarTheTerrible says:

    Ben,
    Rewrite this post, man. Or at least update it with the right dates.

    I chide because I care. And I know you’re better than this.

  20. fatcop says:

    More scams, this time from the Federal Government. Change indeed.

  21. menty666 says:

    Too bad it’s for first time buyers, otherwise you could start a shell corporation, sell it to the corporation then buy it back and claim the rebate/credit/other. Of course that’s probably why they do it that way :)

    As for why you’d want to do it…You could use the money for immediately needed repairs if you bought a fixer upper. When my wife and I bought our home it needed a new boiler and some repairs to the chimney. We got a no down payment loan and used the money we would have otherwise used for the payment to replace the boiler, fix the chimney and widen the single lane driveway. It didn’t necessarily increase the value of the house, but since it’s our home and not meant as investment property, it was money well spent.

    If it *were* a repayable credit, you could take the 8000 and put it into a CD for the next 14 years and make some money off of it. But that doesn’t exactly stimulate the economy.

  22. ZoeSchizzel says:

    DH and I bought a home WITH our son in August (we are all three on the deed as owners with rights of surviorship), because HE is a first time homebuyer and he is homesteading the property — it’s his primary residence — our tax preparer is saying that he can claim the credit? Any other opinions on this?

    • joshua70448 says:

      @ZoeSchizzel: It sounds to me like he should be able to. From the NAHB website:

      What is the definition of a first-time home buyer?

      The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

      For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. ***However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter.*** Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

      I added the emphasis around the unmarried joint purchaser statement. Since it’s a joint purchase without marriage between the owners, it seems like you should be fine. Granted, I’m not a lawyer or a tax professional, so I’d definitely talk to someone who deals with this stuff, but I think it sounds alright.

  23. joshua70448 says:

    I’ve found this site to be pretty useful as well: [www.federalhousingtaxcredit.com]

  24. I_am_Awesome says:

    I would NOT expect congress to remove the repayment requirement of the $7500 credit. The purpose of that credit and the $8000 credit were to provide incentive to buy houses. Changing the terms after you already bought a house does not provide incentive for you to buy a house.

  25. Erwos says:

    We bought at the end of May in 2008. Didn’t take the $7500 – we’re fine financially, and I don’t need to become more indebted to the government.

  26. jsbeagle says:

    It IS a credit. We just closed on our first home a couple weeks ago. I have been against all the bailouts from the beginning, but I will gladly take those 8000 vote buying dollars, buy a used Toyota, and still not vote for all those politicians that are simply growing the size of government (and their power).

    I’ll just make sure to apologize to my kids and grandkids for all that money they’ll owe to make up for all this mess plus interest to China. I’m only 24, so I’ve got a while for all that.

  27. formatc says:

    I gladly took the credit to wipe my credit card debt. A government-backed interest-free loan is far better than juggling my balances between 0% offers. It gives me more money in my monthly budget, and I can save some of it instead of fighting to keep the balances manageable.

  28. Anonymous says:

    As usual, I got screwed.
    My wife and I were told repeatedly that the $7500 would be a tax credit, then we were told it would be a one-time payout that didn’t have to be repaid (like the $8000 deal now) BUT that we had to close in 2008. So we rushed and got closed on December 30, 2008. Note that if we had waited just ONE DAY we would qualify for the $8000 non-repayment deal.

    How is a $7500 loan going to help anyone to buy a home? You don’t get it until AFTER you’ve closed, it can’t be used to buy down your interest rate or reduce the sales price of your home. It can’t even be used to increase your down payment. So, if you can already buy a home without Uncle’s help, you get to borrow $7500 interest-free to help you buy a home? Huh?

    I have no interest in a 0% loan from the feds. But if they’re giving away free money…

    Oh right, I had to wait 24 hours to get FREE money. Silly me.

  29. K-Bo says:

    @Skankingmike which site are you reading?

  30. crazyasianman says:

    bah, leave my coinpurse alone it’s sensitive

  31. dreamsneverend says:

    More shuffling around money that doesn’t even exist.

  32. K-Bo says:

    @Skankingmike I see where you are reading on the actual tax form now. Read a little further and find the bold heading Homes purchased in 2009. They are the ones that do not have to be re-payed.

  33. K-Bo says:

    @joshua70448 That is 2008 information there is a link to 2009 information at the top of the page.

    • joshua70448 says:

      @K-Bo: Yeah, but Skankingmike was referring to the 2008 credit, so I pulled up the 2008 info. They need more 2009 info, though; it’s really hard to find anything about the new stuff.

  34. robocop is bleeding says:

    Woo. First time home buyer closing on Friday.

    We’ll be using the money to help stimulate Bernie and Phyll’s economy.

  35. heismanpat says:

    @undefined: @Skankingmike:

    You are incorrect. This is a refundable tax credit which means you get the full amount and it does not have to be repaid.

    You’re confusing this with the previous $7,500 tax credit (which the $8,000 tax credit replaced). The $7,500 tax credit *did* have to be repaid, but it basically amounted to a no-interest loan over the course of 17 years (you didn’t have to begin repayment for 2 years). There were still plenty of reasons to take that money. Replacing $7,500 of your mortgage with a no-interest loan wasn’t a bad deal.

    • Skankingmike says:

      @heismanpat: Actually the article links to the 7500 dollar tax credit which is why I’m confused, I do not see anything on the IRS site about this new Tax Credit.

      • joshua70448 says:

        @Skankingmike: At the top of the Information Center link is the following paragraph:

        NOTE: Information on this page applies to qualifying home purchases completed in 2008. The American Recovery and Reinvestment Act of 2009 expands the First-Time Homebuyer Credit for 2009. If you made a qualifying home purchase in 2009, the IRS has important information for you.

        And there’s a link to the new 2009 tax credit info page: [www.irs.gov]

  36. azsumrg1rl says:

    As previous commenter said, the information contained in this post is inaccurate and misleading. For purchases in 2008, the “credit” is $7,500 and must be repaid. For purchases in 2009, the credit is $8,000 and does not need to be repaid.

    I think what frustrates me the most about this inaccurate posting is that I contacted Consumerist a month ago regarding the $7,500 “credit” and the confusion surrounding it–especially after two tax consultants thought we were nuts for declining what essentially amounts to an interest free loan. (Why borrow money when you don’t have to? I can’t see the future. I don’t know if we can afford to add on $500 to our tax bill each year. What if one of us stops working? There’s just too much that can change.) I even asked in my email to Consumerist if there were any other benefits to taking the loan. Considering the amount of email Consumerist gets, I wasn’t surprised when I didn’t receive a response. I am surprised that they posted information on the loan/credit that didn’t accurately describe the program(s). Hopefully, Consumerist will clarify the post.

  37. chicagojim says:

    Yay – They get a credit and I get higher taxes to cover it, incuding yet another property tax bump this year.

    Swell. . .

  38. K-Bo says:

    @azsumrg1rl There is another benefit to taking the loan, take it, put it into CDs to get interest, then use it to pay back. It won’t matter if you aren’t working when repay time comes, because you will still have the $7500 plus interest.

  39. EricaKane says:

    I would think the IRS will issue some type of ruling regarding the $7,500 and just consider it a credit. Maybe I’m wrong, but I don’t think so.

  40. temporaryscars says:

    Wait…I’m confused…when do we claim this? Right now or on next year’s tax return?

    • joshua70448 says:

      @temporaryscars: You can file it on your 2008 1040 tax return this year using form 5405 (if it’s a 2009 purchase, make sure you check the box on 5405 that you’re claiming a 2009 purchase on a 2008 return), or you can file it on your 2009 1040 tax return next year using the same form. If you’ve already filed your 2008 taxes, you can amend using form 1040X and the form 5405 (again, if it’s a 2009 purchase, check the box on 5405). This is based on what I’ve been able to find, so I’d ask a tax professional before claiming a 2009 purchase on a 2008 return, just to make sure.

  41. sanjman79 says:

    I just put a downpayment on a new construction, which won’t be ready to close til Oct 2009. Can I claim the $8000 in my 2008 return?

    • joshua70448 says:

      @sanjman79: Technically, you can only claim purchases made in 2008 on your 2008 return. However, form 5405 has a checkbox allowing you to claim a purchase made in 2009 on your 2008 return, according to the form instructions.

  42. Kaessa says:

    If you bought in 2008, it’s $7500 that you have to pay back. If you bought in $2009, it’s $8000 that you *don’t* have to pay back.

    We took advantage of the $7500 “credit”, with the full awareness that it would need to be paid back. Purchased some much needed household appliances, then paid off a loan with a monthly payment of nearly $550. We now have 15 years to pay it back, interest free.

    Definitely worth it.

  43. Anonymous says:

    Even if the credit ends up having to be repayed for homes bought in 2008, take the credit and make a $7500 mortgage payment with it.

    Just run the numbers through an amortization spreadsheet and see how much free money that ends up getting you in the long run.

  44. K-Bo says:

    @sanjman79 I would think you would only be able to claim 10% of what you put down (since the credit maxs out at 10% of home price, but you haven’t paid the full home price yet), then claim the rest next year when you have finished the house.

    • joshua70448 says:

      @K-Bo: The credit is based on the date you purchased the home (with the note that “if you constructed your main home, you are treated as having purchased it on the date you first occupied it”), and on “the adjusted basis of your home on the date you purchased it.” Also, “if you build, or contract to build, a new home, your purchase price can include costs of construction.” It doesn’t sound like you can split the credit between two returns, but you *can* use a 2009 purchase on a 2008 return.

  45. YungOne83 says:

    DAMN IT!!

  46. K-Bo says:

    @joshua70448 I can’t remember where, but it seems like I read something somewhere about being able to claim it over both years if for some reason (having to do with your income being too high or something like that) you can’t claim in 2008, but become eligible in 2009 ( if you loose your job ) I thought maybe that would fall into the same kind of situation.

    • joshua70448 says:

      @K-Bo: I found that the original Senate version of the bill allowed for “allocation election”, letting you take the credit over 2 years. However, the House version didn’t have this, and I can’t find anything about the current law having this either.

  47. Rob Vrabel says:

    If I already filed my taxes for this year, am I still able to print out the form and submit it? Hows that work?

    I’m eligible but didn’t do it when I filed last month… Knowing its interest free, I’d like to do it now.

    • joshua70448 says:

      @Rob Vrabel: You can amend your 2008 return using form 1040X. You would recompute your taxes, and include form 5405 to claim the tax credit.

  48. twritersf says:

    For those of us who live in California, especially the Bay Area, and who work in high tech and get higher-than-average paychecks (and who are still working), we are not eligible for the credit because we make too much. Not a lot, mind you, but the credit begins to go away at $75K. That may seem like a lot in many areas of the country, but here, it’s not easy to get by–and impossible to pay any sort of mortgage with. (I would love to have been eligible for that credit, having closed last November on a condo for “merely” $415K, just to have the extra cushion in savings in case I do lose my job.)

  49. temporaryscars says:

    When do we claim this? This year or next year? Why was my comment deleted the last time I ask? It has relevance to the story.

  50. stronty says:

    Does this apply to land or the house I build on the land?
    I bought the lot last year(June) and plan to start building this year, I guess I could form a corporation and then buy the home from the corporation, but that sounds like a pain.

  51. brokeincollege says:

    So Obama’s way out of a recession is another tax break for people that rent their homes from a bank that’ll no doubt start a speculative bubble? Good job Obama :thumbs down:

  52. trujunglist says:

    Thanks to all of you that have been looking to scheme on buying a house for $1 and getting an $8000 credit, even though you won’t be getting it because you can’t read. You’re a real tribute to America and Americans; a true capitalist if I ever saw one. You, my dear friends, are my favorite type of person. May I take you to dinner sometime? Afterwards, we can take a stroll by the pier and I can toss you over the side.