$8000 Tax Credit Rebate for

First Time Home Buyer's 

The economic stimulus package just passed by Congress and signed into law by President Obama offers up to an $8000 TAX CREDIT for first time buyers. This is a great opportunity to become a home owner. Below are answers to some of the most frequently asked questions about the new $8000 Tax rebate.

1. What is this rebate?

It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.  The rebate is $8,000 or 10% of your purchase price, whichever is less.  If your home is $80,000 or more, it qualifies for the full $8,000 rebate.

2. Who is eligible?

Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.

3. How does a tax credit work?

If you owe no taxes, and receive a tax credit, you will receive a refund check for $8,000, just like any other refund.

A tax credit reduces the total tax owed dollar for dollar. If you owe $10,000 in income tax and receive an $8,000 tax credit, you would still be responsible for $2,000. In other words the $8,000 tax credit would reduce the amount owed by $8,000. 

This is a refundable tax credit.  If you owe $6,000 in income tax and receive an $8,000 tax credit you will be refunded the difference, or $2,000.

4. So what happens if the purchaser is eligible for an $8000 credit but their entire income tax liability for the year is only $6000?

This tax credit is a "refundable" credit. If your total tax owed is $6,000, the IRS will refund the difference between what you owe and your credit. You would receive $2,000 back.

5. What if I owe no taxes?

If you owe no taxes and receive an $8,000 tax credit you will receive and refund of $8,000.

6.Is there an income restriction?

Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

7. Do I have to repay the 2009 tax credit?

NO. There is no repayment for 2009 tax credits.

If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it

8. How do I claim the credit?

The credit is claimed on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.

9. Can I use the credit amount as part of my down payment?

No. You may claim the credit after you closing.

10. What if I purchase later this year but can’t get to settlement before December 1?

The closings must occur before December 1, 2009 for purchases to be eligible for the credit.

11. I have already filed my 2008 tax return yet. If I buy in 2009, do I have to wait until next year to get the benefit of the credit?

If you have filed your 2008 return before you purchase the home, you may file an amended 2008 tax return on Form 1040X. (Form 1040X is available at www.irs.gov). Attach the new Form 5405 to your amended return. 

If you owe taxes, your balance will be reduced by the amount of your rebate and you will receive a check for the difference.  If you do not owe taxes, you will receive a check for the amount of your rebate.

Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.