$8,000 Credit For First-Time Homebuyers Extended 6 Months – Not Increased To $15k

Earlier this year an $8,000 credit for first time home buyers was instituted as part of the 2009 Stimulus package.  The idea behind this credit was to help out first-time home buyers and encourage them to purchase a house.  Sinking house prices and a stalled house building sector were the main motivations for this credit.

[edit July 8, 2010 – closing deadline extended for first time home buyers tax credit to Sept 30, 2010]

The original plan called for December 1, 2009 to be the deadline for the $8,000 credit.  To get the credit your house purchase close date would have to be before Dec 1.  A senate bill has just been introduced on Sept 17 which would extend the first time home buyers credit by 6 months to June 1, 2010.

From Housing Wire:

A senate bill introduced late Thursday would extend the $8,000 first-time homebuyer tax credit for six months after its current November 30 expiration date.

Maryland Democrat Sen. Benjamin Cardin introduced S.B. 1678, and it is co-sponsored by senators John Ensign (R-Nev.), Johnny Isakson (R-Ga.), Senate majority leader Harry Reid (D-Nev.) and Debbie Stabenow (D-Migh.).

Who is eligible?

If you buy a home between January 1, 2009 and June 1, 2009 and meets the following conditions:

  • You must not have owned a house in the past 3 years.  This is the “first time” homeowner condition.
  • Your income must be less than $75,000 for singles or $150,000 for married couples.  Keep in mind that singles who make up to $95k and couples who make up to $170k can get a partial credit.

Is this credit a loan?

No, this credit does not have to be paid back.

Are there any strings attached?

You have to stay in the house for 3 years.  If you don’t then the money has to be paid back.

What is a “first time home buyer”?

A first time home buyer is someone who hasn’t owned a house in the past 3 years or has never owned a house.  For couples – this applies to both spouses.  It is important that if you sold your last house in 2006 that you don’t close on the new house within 3 years of the previous selling date or you won’t get the credit.  For example if you sold your last house on June 1, 2006 then don’t close on a new house before June 1, 2009.

Is the tax credit $8,000 for everyone?

No, the actual credit is $8,000 or 10% of the house value – whichever is less.  For example if your house is worth $200,000 then you would get $8,000.  If the house is only worth $70,000 then you would only get 10% of $70k which is $7,000.

This is a refundable tax credit

The $8,000 credit means that anyone who is eligible for this credit can subtract $8,000 from the amount of tax owed to the IRS.  If you don’t owe $8,000 in taxes then you will get a refund for the difference.

For example if Bob owes $30,000 in taxes and is eligible for the $8,000 credit then he will deduct $8,000 from $30,000 and will owe only $22,000 in taxes.  Steven only owes $5,000 in taxes so if he qualifies for the credit then he will not pay any taxes and will get a refund of $3,000.

Carnival of Financial Planning.

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9 replies on “$8,000 Credit For First-Time Homebuyers Extended 6 Months – Not Increased To $15k”

We have to be Real Careful with these things that are tantamount to a give-away down-payment program. FHA’s default ratios are filled with ever increasing evidence that these are the exact kind of borrowers who default the most. Nothing against them as people, mind you… I’m sure they’re fine, hard-working folks. But the evidence is that We are bearing the weight of what is proving to be their defaults… and we have enough ‘faults’ of our own (pun intended).

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