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

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.

Credit*

not a rebate, you have to pay this back.

Why would you do this?

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

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.

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.

@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!

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]

@burnedout: I bought in December and am also a little mad. However, it's a loan and not a true credit as Ben makes it sound. That makes me feel a little better.

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!)

@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.

@HarcourtArmstrong: Actually it's a real credit for those are buying this year. That was the major change.

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.

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?

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.

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.

@Adam Rahuba: I think its either 10% of the value or $8000. So if you buy it for a dollar your rebate would be 10 cents.

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.

@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.

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.

@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.

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.

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.

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

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.

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?

@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. ;-)

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

@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.

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.

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.

@I_am_Awesome: According to my accountant, the IRS has the authority to do this. It won't take an act of congress.

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.

@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.

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.

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.

@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?

@Skankingmike which site are you reading?

bah, leave my coinpurse alone it's sensitive

More shuffling around money that doesn't even exist.

@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.

@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.

@K-Bo: [www.irs.gov] in the "How is the credit repaid?" answer.

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

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.

Woo. First time home buyer closing on Friday.

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

@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.

@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.

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.