New homebuyers to get $8,000 cash back
Tuesday February 17, 12:14 pm ET
By Les Christie, CNNMoney.com staff writer
There’s a nice windfall for some homebuyers in the economic stimulus bill awaiting President Obama’s signature on Tuesday. First-time buyers can claim a credit worth $8,000- or 10% of the home’s value, whichever is less - on their 2008 or 2009 taxes.
A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision.
Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:
“I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?”
The short answer? Yes, Billings would get back the $8,000 plus what he’d overpaid. The long answer? It depends. Here are three scenarios:
Scenario 1: Your final tax liability is normally $6,000. You’ve had taxes withheld from every paycheck and at the end of the year you’ve paid Uncle Sam $6,000. Since you’ve already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you’ve overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you’ve underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Economic Stimulus 2009: Frequently Asked Questions
'Making Work Pay' tax credit
First-time home buyers' credit
Q:
I'm hearing about an $8,000 first-time home buyer credit that doesn't need to be repaid - is it too good to be true?
I'm hearing about an $8,000 first-time home buyer credit that doesn't need to be repaid - is it too good to be true?A:It's true. For eligible first-time home buyers who purchased a home after Jan 1, 2009 and before Dec 1, 2009, the stimulus bill provides for a refundable credit equal to 10% of the purchase price of the home, up to $8,000.
It's true. For eligible first-time home buyers who purchased a home after Jan 1, 2009 and before Dec 1, 2009, the stimulus bill provides for a refundable credit equal to 10% of the purchase price of the home, up to $8,000. And, yes, unlike the credit provided last year, this first-time home buyer credit does NOT have to be repaid, unless you sell the home or it no longer is your principal residence within 36 months of purchase.
The Tax Institute has asked the IRS for guidance on how the credit should be claimed on a 2008 tax return until the IRS can update Form 5405 to reflect the increased credit.
Q: Are there income phase-outs with this first-time home buyer credit?
Are there income phase-outs with this first-time home buyer credit?A:Yes. The new $8,000 credit begins to phase out for individuals with incomes over $75,000 or married couples with incomes over $150,000 filing jointly.
Yes. The new $8,000 credit begins to phase out for individuals with incomes over $75,000 or married couples with incomes over $150,000 filing jointly.Q:But what about those of us who purchased a home in early 2009 and took advantage of the $7,500 credit when we filed on our 2008 federal tax return = are we just out of luck?
But what about those of us who purchased a home in early 2009 and took advantage of the $7,500 credit when we filed on our 2008 federal tax return = are we just out of luck?A:No, you can still take advantage of the $8,000 credit if you purchased your home in 2009, but you will have to file an amended return to claim the additional credit, up to $500, to which you're entitled.
No, you can still take advantage of the $8,000 credit if you purchased your home in 2009, but you will have to file an amended return to claim the additional credit, up to $500, to which you're entitled.You must have purchased your home in 2009, however, to be eligible for the up to $8,000 credit. Homes purchased in 2008 do not qualify.
Q: I purchased my home in 2008 and was eligible for the $7,500 first-time home buyers' credit, will I still have to repay it?
I purchased my home in 2008 and was eligible for the $7,500 first-time home buyers' credit, will I still have to repay it?A:Unfortunately, yes. Those who purchased homes in 2008 and received the first-time home buyers' credit are still required to repay the credit over a 15-year period, or sooner if they do not continue to live in the home as their principal residence for the full 15 years.
Unfortunately, yes. Those who purchased homes in 2008 and received the first-time home buyers' credit are still required to repay the credit over a 15-year period, or sooner if they do not continue to live in the home as their principal residence for the full 15 years.Financing is Available!
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