All About the $8,000 Non-Repayable Tax Credit

First-time Home Buyers Get $8000 Tax Refund In Stimulus Plan

Apr 15, 2009 Swapna Antony

The economic stimulus plan of 2009 gives a tax credit of $8,000 to first-time home buyers. Though less than the originally expected $15000, this will revive the economy.

In order to boost the economy and help the ailing housing market, congress recently introduced a $8000 non-repayable credit for first-time home buyers. This credit is different from the $7500 credit of 2008 in that the $8000 need not be repaid. The $7500 credit was to be repaid over a period of fifteen years making the credit an interest-free loan in effect .

A first-time home buyer is defined by IRS as someone who has not owned a principal residence during the three year period prior to the purchase of the home.The tax credit is equal to 10 percent of the home’s purchase price subject to a maximum of $8,000. This credit is only available for homes whose date of purchase is on or after January 1, 2009 and before December 1, 2009. The date of purchase is defined as the date when closing occurs and the title to the property transfers to the home owner. Another important requirement is that home buyers must use the residence as a principal residence for at least three years failing which the amount will be recaptured.

First-time Home Buyer

A first time home buyer, as explained above, is someone who has not owned a principal residence for three years prior to the purchase. In the case of married people, the buyer and his/her spouse should not have owned a principal residence for three years.

Income Limits

The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit is phased-out for incomes exceeding this limit and will equal zero for single taxpayers at $95,000 and at $170,000 for married taxpayers filing jointly.

Principal Residence

Any home that is used as a principal residence will qualify. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. A principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. For claiming tax credit, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

Claiming the Tax Credit

Home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return in order to claim the tax credit on your federal income tax return. No other applications or forms are required, and no pre-approval is necessary.

$8000 vs. the $7500 Tax Credit

The $7500 credit was available to home buyers who purchased a home between April 8, 2008, and before December 31, 2008. This credit is repayable over period of 15 years in 15 equal installments, starting from 2010. Homes purchased between Jan 1 2009 to Dec 1 2009 are eligible for the $8000 tax credit, which is fully refundable. Even if the home buyer has no federal income tax liability, the tax credit can be claimed and the government will send a cheque for the amount claimed.

The $8000 Tax Credit can now be used for down payment and closing costs. To learn more about it, read Bridge Loans From the $8000 Tax Credit.

Considering that home prices are at a reasonable level, this is an ideal time to go for that long-cherished dream of owning a home. The $8000 non-repayable tax credit makes it doubly attractive to first-time home buyers.

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