Details About the $8,000 First-Time Home Buyer Tax Credit

8000 First Time Home Buyer Tax CreditWant a free $8,000 tax credit just for buying a home? Well, if you’re a first-time home buyer, you may be eligible for a first-time home buyer tax credit of up to $8,000. If you ever thought about buying a home, now might be a good time to go for it.

I know this credit has been around for some time now. But earlier in the year I wasn’t too interested in it. Truthfully, I was mad that I didn’t get 8 Gs towards my home purchase, which I bought back in 2007. But, I’m over it now, and there’s been enough changes with this thing to warrant a fresh post from me. So, here goes.

About the $8,000 First-Time Home Buyer Tax Credit

Back in 2008, in attempts to spend our way out of trouble, the US Government passed the Housing and Economic Recovery Act. Included in the act was a credit for all first-time home buyers of $7,500. That credit was then replaced by a $8,000 tax credit as a result of the American Recovery and Reinvestment Act of 2009.

The credit, as you can tell by the name, is meant to encourage the purchase of homes by people who don’t already have them. I guess the theory is that all these newbies get out there and buy the homes lost in foreclosure.

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How Much is the Home Buyer Tax Credit?

The 2008 credit was for $7,500, and unfortunately needed to be paid back. The current 2009 version is for $8,000, and never has to be paid back. That’s amazing, isn’t it? I’m so jealous.

To clarify, the credit is “up to” $8,000. It’s actually the lesser of 10% of the home price or $8,000. That’s a nice chuck of free cash. I can think of a lot of things I could do with that credit.

It should also be noted that the credit is refundable. So, it does more than just offset taxes owed. You get the extra cash in had.

Who is Considered a First-Time Home Buyer?

Okay, so if I don’t qualify for this credit, who does? First-time home buyers according to the IRS guidelines are taxpayers who have not owned a principle residence at any time during the three years prior to the date of the purchase. So, really, it should be called “it’s been a while” home buyer credit.

And you must be purchasing the home. It can’t be a gift.

Another stipulation is that you must stay in the home for three years. (How is the IRS going to audit that one?)

Important Dates

The home purchase should be made between January 1, 2009 and November 30, 2009 to be eligible for the 2009 credit of up to $8,000. Purchases prior to January 1, 2009 are only eligible for the 2008 version.

So, the key thing to take away from this is to make sure you find your best mortgage rate and purchase your home before December 1, 2009. I bet that will be a hectic closing day for some. Although, I’m thinking this credit might get extended, cash-for-clunkers style. UPDATE: The credit was extended as predicted.

How to Apply to Get the Credit Now

Getting the credit is extremely easy. The IRS has created a form to be filed with your return. It’s Form 5405, and it essentially only requires that you list the date of the purchase, purchase price, and the address of the home. The 2009 credit can be taken against your 2008 return. So, if you buy a home today and qualify for this credit, you can file an amended 2008 return and receive your $8,000 credit now. Actually, the process apparently takes around six weeks. Still, that’s fast action.

Income Limits

In it’s continued assault on high earners, our government required that this credit only be given to those under certain income levels. Joe the Plumber would be proud. Anyway, here are the specs: the credit phases out for incomes between $75,000 to $95,000 for a single filer, and $150,000 to $170,000 for couples.

Fraudulent First-Timer Claims

When I first looked into this credit and how easy it was to make the claim, I thought surely the IRS must be getting flooded with fraudulent claims. After all, you don’t need to turn in anything but the one Form 5405. No closing documents. No sales contracts. Nothing.

Recent news is saying that there is fraud out there. And the IRS is cracking down on the tax preparers that are caught over-doing it, and/or skimming from the top. Tax preparers are obviously held to a higher standard. If the IRS catches you, you’ll likely just face back taxes and penalties. That makes me think many taxpayers might be cheating the system here and taking their chances for the $8,000.

Regardless, this looks to be another tax payer funded program that could legitimately put cash in your pocket, if you’re in the right place at the right time. I wish I was.

I’d love to hear your story of buying a home this year as a first timer. If you recieved your $8,000 credit already, or if you are planning on getting it before the deadline, let us hear about it in the comments below.

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Last Edited: March 28, 2013 @ 12:45 am
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

129 comments
Tornadotammy
Tornadotammy

My boyfriend and I bought a home 24months ago and got the homebuyers credit of $8,000.

My son needed help so my boyfriend loaned me the money to buy a condo and my son lives in it. My boyfriend made me take my name off the deed but not the mortgage to secure his loan being paid back. I still live with him in the house as our primary residence. I do live there and plan to for the required 36 months but my name is off the title syill on mortgage. I can prove I live there but am worried I may have to pay back 1/2 the credit? do i? Help?

J80
J80

I have to call the IRS tomorrow, my house burned down in July, do i still have to repay it since i bought it in 2008?

2007keri
2007keri

We bought our first home in Sept. of 2009 and we amended our 2008 return and got the full $8000 a short time later in October 2009. It was awesome!

meemee
meemee

I bought a house at the beginning of 2011 and closed the deal april 30 2011. Can I still get a housing amendment tax credit for the purchase of my house. do they still have the housing tax credit for 2011

stevedenise
stevedenise

Also also, we studied the programs down to the fine print, if you live in an RV you are fine etc. We even have the dates correct but IRS MAIN LOCATION reply "applied prior to legislation passage, PLEASE PROVIDE PROOF OF HUD". So hud papers cleared that up with local office agent. Why would they say before legislation passage. I am only concerned because the agent did what she could as a phone agent did once before then we were denied again. Each time they change their mind it costs $120 per month in late fees. I will opt out of ANY future tax credit plans. NO WAY. If I could pay the 8 grand back without the BS interest even though we currently owe nothing I think I would because someone can ping your return and it starts all over again.

stevedenise
stevedenise like.author.displayName 1 Like

We have been through the ringer with this. Approved, then 2 years later disallowed $9400 required ASAP, appealed with nice IRS agents. New letter Disallowance in ERROR by the IRS from the IRS. 2 months later bill for $9500 and threatening to seize property if not paid. Filed HUD papers and all good for now. What is scary and stinks is you can be OKAY then NOWAY? Also, I am so scared even though the IRS agent assured me all was well of getting another denial letter. Agents are generally nice.

CINDY10
CINDY10

DOES ANYONE KNOW IF THEY ARE DOING THE REFUND FOR FIRST TIME BUYERS OF 2011..PLEASE LET ME KNOW.. THANKS ;)

xcaro02
xcaro02

@CINDY10 They are doing a 2011 refund but it is only for uniformed members that were on a mission overseas or 50 miles away from their home between 2008 and 2010

SammyJ
SammyJ

I am a recent home buyer. oct. 2011. i am wondering if there is anything for homebuyers still out there or not? please let me know :)

Diamond DaBoots
Diamond DaBoots

 @SammyJ Sammy we missed out on credits.  I purchased my first home May 2011.  So we must start donating clothes to salvation army, giving donations to organizations that are tax write offs so we can itemize for 2012 tax season :-(

maryjanebrosnan
maryjanebrosnan

Great insights and discussions I find here! I hope somebody answers also my questions, my sister sold her house because she was afraid to pay her mortgage payments for the next month because she lost her job, but there still she hasn't receive any foreclosure notice. The sale was successful, but after a month a notice came to the new owner of her former house stating that the house was in foreclosure addressed on my sister's name. What shall we do?

Glad to hear answers. Thanks!

<A HREF="http://foreclosureclearance.com/las-vegas-foreclosures">Las Vegas Foreclosures</A>

fthbc
fthbc

i bought a home in december 2008 and moved 2.5 yrs later...now the IRS wants me to pay $1500 in penalties and $950+ in interest plus the $7500 back right away.

Is this right...how are we suppose to know that in this current job market, I would have to move and not be able to live in the house .....

Diamond DaBoots
Diamond DaBoots

 @fthbc Hi fthbc, according to what I read, you had to stay in your home at least 3 years

 

2007keri
2007keri

@fthbc

Yes that is right, it's one of the main stipulations, you took the gamble, no one knows for sure that they will be able to stay in a house for any amount of time but you willing took the money with that listed as a stipulation so it's your job to pay it back. Plus, in 2008 the credit has to be paid back over the course of the next 15 years anyways. If you waited until 2009 the credit did not have to be paid back unless you moved before the 3 years was over.

MaryClark
MaryClark

Get a lawyer!!! right away! The IRS is evil and cares NOTHING about you or your family! Trust me!!! Get a tax lawyer.

Yanira C
Yanira C

Hello,
I still have a question now that year is ending and I haven't complete the 5405 because I haven't been sure about it...

If I enter into a contract on April 2010 with a builder to build my first new, and the house was to close on October but we closed on September 30th...am I still qualified?

I am asking the question because the form 5405 says something about the binding contract on July which is confusing...

Thanks!

Geralyn de Levie
Geralyn de Levie

Hi I have a question,I'm not a U.S cetizen yet ( green card holder) I purchased my first house last june 2010, but my monthly income from the V.A and SS for survivor benifets and its untaxable. But my monthly payment for the house includes with tax. Is there a possibility I can file for tax refund? I just want to know whats my availability for tax refund.
Hope you can help me.

Thank you,

Eric
Eric

The IRS is a pile of dung as far as I'm concerned. My wife owned a home, we got married and six months later purchased another home in the state we were living in. I had never purchased a home. Because I married her the IRS says that I had principle interest in the home and now we owe a $1500 penalty plus interest. The title was still firmly in my wifes name only and I had no real claim to the home, yet three years later the IRS is coming after us saying that I did not qualify! IF THIS IS YOUR SITUATION DO NOT TAKE THE CREDIT THEY WILL F$#% YOU FOR IT!

For Sale By Owner
For Sale By Owner

I appreciate your effort, its an excellent post for first time home buyer. Details you mentioned would help the first time home buyers

Amy
Amy

Hey guys!
my husband and I bought a house in 2011, do any of you guys know if this tax still exists?

Diamond DaBoots
Diamond DaBoots

Amy we missed the deadline, unless you are uniformed service it was extend until April 2011.  I just purchased my home May 2011, not first time tax credits. It was not extend in the Bill.

Jennifer
Jennifer

Wow what can I say I filed in March of 2010 for the 8,000 credit on our taxes. August they denied us saying that we only bought land and not a home well there is a house built here on the land I am living in and had been so appealed which starts the process over and well I got the credit in May 2011. Yep it took over a year for them to approve it. It took lots of back and forth of sending then this and that but we got it just took forever. I hope everyone else had a easier time getting it.

Lynelle Howard
Lynelle Howard

I just received a letter from the IRS dated July 29, 2011, disallowing my first-time homebuyers credit, because I closed on my home on April 2, 2008, and apparently, the law was enacted on April 9, 2008, unbeknownst to me. I got the credit on my piddly little home that cost $72,000, have begun to pay it back via my last tax return/tax obligation. Now they apparently want me to pay it back quicker, and it will certainly cause a severe hardship for me to do so. I use TurboTax, and nothing was asked or said about the exact date of the enactment. One week early, and I don't get the credit. What to do?

Diamond DaBoots
Diamond DaBoots

Lynelle contact IRS and set up a payment plan.  Send a  letter of hardship, provide what you have already paid.  Sometimes if you show them that you are not trying to avoid the debt, it will simmer them down.  Paying it back only through when you file your tax return, is not what they want to see.  If you tell them you can pay $40-50 a month or every two weeks, sometimes they will take the agreement.

 

When I ran into some tax problems some years ago.  That is how I satisfied my debt on a small income as well. I hope this helps.  Don't get stress, just do what you can. A small payment a month can go a long way, then to have them garnish a part of your wages.

fm
fm

I've got the credit but no one finance me a home becouse my credit is less than 500 so I had to wait while waited I spend the money now no money no home and am back to my old job after 1 year ...what happens nowwill I pay back I got it in 2009...now my taxes can't be done is asking for my info of my home

Diamond DaBoots
Diamond DaBoots

fm, in your case I would call IRS directly and let them advise you of what your nex steps are

 

PT
PT

@Joedy - Yep. It's eligible. Both the motor home and the land you purchase to put it on.

Joedy
Joedy

Hi PT. Any chance, above slim and none, that a MOTOR HOME would be eligible for the credit?

Lisa
Lisa

David B., you should be okay because you signed the contract by April 30th. Now you have until June 30th to close.

Jenn M.
Jenn M.

David B, You will have to close by the 30th to be eligible for the credit.

David B.
David B.

I'm purchasing a short-sale house. The seller has signed the contract, but I'm waiting for the bank holding the mortgate to approve the sale price.

Question: For short sales, does the bank holding the mortgage have to approve the sale price by April 30th for me to be eligible for the $8000 tax credit, or is it enough that the buyer (me) and seller have signed a contract before Apr. 30th?

Paul
Paul

They usualy process it all at the same time but it seems like they are doing every case a little differant, I don't think they ever planned on this big of a response.

Jared
Jared

I filed for the 8000 dollar first time home buyers credit back in March. Including my federal and state I was supposed to get back roughly 10000. I checked my account today and I have recieved the 2000 of my state and federal but I havent recieved my 8000 home buyer credit yet. Is the home buyer credit processed seperately?

Diamond DaBoots
Diamond DaBoots

Hi, Jared. If you go on IRS.gov, there is a link you can click to check on the tax credit.  I was just on there today.  

Paul
Paul

Stephanie, I am so sorry they are putting you throught this after all you and your Husband have already been through. Did they give you areason for the denial?
Try writing or calling your Congressman and Senator. Thank your Husband for his service and hope you get the money soon.

Stephanie
Stephanie

Huh... curious everyone has had such a great experience. I just got a letter TODAY that our credit was DENIED. We are a military couple, husband was injured in Iraq and is being medically retired due to his injuries. As a result, we bought a home (a fixer-upper) so we would have somewhere to live once out of the Army. We have never owned a home before, and certainly don't make too much money! Yet for some reason we have been denied! We filed in February, and have waited for three months... we were counting on that money to buy appliances and replace doors and locks in the home, now I don't know what we'll do! I am so frustrated and so scared... my husband doesn't deserve a denial after what he's been through. And I just don't know where to turn for help.
But hey, why should an injured Iraqi war vet get the $8,000 he deserves to help provide for his family, he only put his life on the line so everyone else could get it.

I am so hurt... and feel so discarded right now. I just don't what I am going to tell him when he walks in the door from work tonight.

Paul
Paul

Thanks to Joanie, Lisa, and Nick.
It seems like they do want all this , so I will send it all to be safe.

Nick
Nick

-Lisa- i heard from an accountant who does my taxes...i guess these new rules were added when the extension for new homebuyers was added (not sure exactly when) but i'm pretty sure in november '09. i havent heard anything back from my senators after leaving messages, but i will continue to again

Lisa
Lisa

I closed on my house on 2/26/2010 and mailed my tax return in mid-March. All I included was a copy of the fully executed HUD form and in less than 6 weeks, I received my refund.

Joanie
Joanie

Yes I had to do the same thing... I also had to mail in my taxes this year since I had to send paperwork to prove I bought my house. A few weeks ago I got a letter and forms back from the IRS asking me to send in a copy of my DL and paystubs with my new address on them. I sent them in about 2 weeks ago and have not heard anything back yet (keeping my fingers crossed!). So I think this is pretty standard so you should not worry - I will post again when I actually get the money!!! Good Luck!

Paul
Paul

My Daughter bought her home in 2009. I filed her taxes for her using tax act on line, but we had to print the return and mail it. All we included was the signed Hud-1 and she got her $ 8000 dollars in a few weeks.
Now I am in the process of buying a home, and have a signed contract before the April 30, 2010 deadline. I called H&R Block to see if they will file for me after we close and was told yes for $ 99 , I alreadt did mt 2009 taxes on their online program, so will have to do an amended return. They told me I would need the HUD-1 and a Drivers Licences with the new address, a recent pay statement with new address, a bank statement with new address and a mortgage statement. I can't find anywhere online where it says you have to have all this proof. Does anyone know about this?

Joanie
Joanie

@nick - I can understand your pain! I closed on my first home last Nov. 20th and I bought it in a short sale from my b/f's parents and we had actually been living there renting the place for 3yrs before I bought it. Myself and my b/f's parents had to show endless paperwork to prove that I was not buying it to 'bail them out' it was a HUGE pain but there defiantly a parent clause that says you will not qualify if you purchase from family, it sucks, thank goodness I lucked out. I sent in my tax return this last Feb. and just recived paperwork from the IRS asking for 2 forms of proof that I actually live there (DL and paystub), just dropped it in the mail this morning - keeping my fingers crossed!

Joyce
Joyce

I think we were used at getting this credit, as we didn't fully understand it. We've been taken advantage of and don't know where to go or what to do about it. Alot of things weren't told to us until it was to late to stop the signing. We felt we had no choice in signing contract with this man. We're disable and need help. Please help.

PT
PT

@Lisa - My understanding is that the relative clause has always been in there. The docs required may have changed, but the purpose behind the credit remains the same.

Lisa
Lisa

Heather, Nick, and PT:
I read your posts and am wondering a few things.
Nick:where did you find info about the dates the new stipulations went into effect? I am goint to try to contact my senators and reps (Mass.) as well.

In April 2009, My sister purchased at fair market value (2 appraisals) my grandmother's house. The house was actually in a trust (that my mother was in charge of) so she actually purchased from the trust. She has now been told by a tax preparer that she doesn't qualify.

PT: My Q is, if she were to file an amended 2008 return, would she still fall under the new stipulations...or those in effect at the tax time April 15, 2009? If people previously didn't have to supply extra info/didn't matter if you bought from a relative...would that still work now?

moses
moses

well it has been about 7 weeks and i havent recieved my house credit yet when do you suspect i shall recieve my tax credit im really getting frustrated.

Diamond DaBoots
Diamond DaBoots

Hi, Moses.  There is a link on the IRS.gov website, that you can check your tax credit status. Try that and see it that helps

Nick
Nick

I purchased my first home last year assuming i would qualify for the $8000. Now i find out as i am having my taxes prepared that i am disqualified because i bought the home from my parents. This is totally unfair!!!! My parents moved and their house sat on the market for almost two years. I took out a mortgage and purchased it at fair market value and i should not be cheated out of the tax credit. I closed on the house in August and then this stipulation was signed in November!!!!! I understand why this was added...people try to cheat the system, but what about people like me who did everything by the book and then they change it on you after you buy the home?!!!! The re must be a way for this to be amended....??? i contacted two of my state senators and haven't heard anything back from their staff and probably won't. I don't know what else i can do.

Diamond DaBoots
Diamond DaBoots

Hi, Nick.  It takes some time for the senators office  to get back to you.  They have to do the research for being able to respond to you accordingly.  There are so many steps when writing your congressman.  

 

It may take a few months.  If you haven't heard anything in 60 days do a follow up by calling the senators office.

Jim Haywood
Jim Haywood

I applied for the $8000.00 taq credit the middle of november 09.
The first week of Feb 2010 They asked for utility bill driver license with the new address on it. The middle of March the sent a letter rejecting my claim saying public records show me as owner of a home. I called them and was told I had utilities at my old address. Well I did, I rented that place since 2005 utill purchasing the home I now live in. I haven't owned a home since 1993. I bought new furniture on a credit card with regard to getting this $8000.00 in 10 weeks as I was told. The interest is 25% and costing me between$100.00 and $150.00 per month. My $8000.000 is shrinking very fast waiting for my check. I don't know if I am going to get it or not. I qualify as much as anybody for this check. These are the same people that will handle our health care.