A couple of weeks ago I wrote a post about the proposed $15,000 home buyer credit. The credit was scaled back and by the time the stimulus package passed Congress it was the $8,000 home buyer credit. Last year, in the Bush plan, we had a $7,500 home buyer credit. Confused yet? Me too!
What it is
Now we have the $787 billion (yes billion) dollar economic stimulus package that was recently signed in to law and contains a home buyer credit as well. Bear with me as I try and work through this.
First-time homebuyers who purchase a home between January 1, 2009 and November 30 , 2009 may be eligible for a tax credit of $8,000 or 10% of the purchase price, whichever is lower. The $7,500 credit from last year is required to be repaid at zero interest over 15 years, however, the new $8,000 does not need to be repaid.
A first-time homebuyer does not mean the buyer has never owned a home, but rather, has not owned one in the preceding three years. If married, and filing joint returns, both individuals would need to meet that criteria.
Any home used as a principle residence should qualify whether it is a single family home, a condo, a town home, a manufactured home or a houseboat – as long as it is the primary residence. If you are building a new home occupation must occur by November 30, 2009 to qualify.
Taxpayers earning over $75,000 for a single person, or couples making over $150,000, will experience a reduction in the amount of the credit as it is phased out.
There are some who do not qualify for the credit such as:
- Non-resident aliens
- If the home is sold in the first three years the credit must be repaid
- Adjusted Gross Income for a single over $95,000 or couples over $170,000
- If the home is purchased from a relative
Tax Credits and Tax Deductions
There is a difference between tax credits and tax deductions. While deductions work toward getting your adjusted gross income and then lowering that to figure out the tax liability, tax credits come right off the bottom line reducing the tax liability. If you owed (had paid) $7,000 in tax with the $8,000 credit you would receive a $1,000 refund. Or, if your tax liability was $12,000 it would be reduced to $4,000 making use of the $8,000 credit.
If your home was purchased in 2008 the $7,500 tax credit will still apply. There is more of description on that credit in this article
2008 Housing Reform
More Reading: Update on Usage
HUD Announces $8000 Tax Credit Can go to Closing Cost, etc.