Questions About the $8,000 First Time Homebuyer Tax Credit

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I find myself way behind in answering comments on my recent post about the $8,000 First Time Homebuyer Tax Credit. So instead of answering them all there, I thought I’d use today’s post to share some Q&A on the $8,000 tax credit. That way, everyone learns. Let’s get it started with some basic information.

What is the first time homebuyer tax credit?

In short, it’s a US federal tax credit available to qualifying individuals who are buying their first home. The credit has been around a while, but this year’s variety does not have to be paid back, and it can be for as much as $8,000.

Who is considered a first time homebuyer?

Taxpayers who have not owned a principle residence at any time during the three years prior to the date of the purchase. These taxpayers must be buying the home, not receiving it as a gift. And they must stay in the home for three years.

What is the deadline to buy a home and qualify for the credit?

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.

How do I get the credit?

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.

Does everyone get $8,000?

No. The credit is “up to” $8,000. It’s actually the lesser of 10% of the home price or $8,000. And the credit phases out for incomes between $75,000 to $95,000 for a single filer, and $150,000 to $170,000 for couples.

Now for some more complex questions from the readers:

Mel – Only my name that is on the deed of a house we recently purchased. To qualify for $8000 tax credit, should we have to file singularly, or as a married couple?

You will get the tax credit whether you file separately or jointly as a married couple. But married couples can only get one tax credit between them.

eric – Seller wanna rent the house for 10 days after closing. We plan and should be able to cloase on late Oct. My qestion is will the 10 day renting disqualify us to get $8000. We are otherwise qualified for that credit.

That should not disqualify you. You’re intent is to live in the house and take full responsibility for it. The 10 day rental, and you being a landlord isn’t the intent of buying the property. You intend to take possession and live in the property full-time. I think the IRS would see the 10 day period as only a temporary thing and separate it from the purchase. You might want to check with a CPA to be sure though.

abe – if i purchased a mobile home for 20000 would i get a 8000$ credit?

No. You would get a credit, but it would only be for $2,000, or 10% of the purchase price.

Cindi – We sold our home and closed Sept 2006 gave the keys to the new owner and had to be out. Well we got a call a couple of days later saying we needed to reclose due to financing. So, 2 wks later (after we’ve moved) we reclosed Oct. 12, 2006. Well we just built a new house and have moved in but will not close until Oct 1, 2009. I cannot move the Oct. 1st closing due to our construction loan has matured Will we be able to get any kind of credit?

Yes, you should get a refund. For all intents and purposes you lost possession of the house in September 2006 and didn’t have an ownership interest after that point. The 3 year clock starts ticking at that point. Therefore, you met your 3 year requirement. You may need to ask a CPA though to be sure.

Roxanne – My mother is considering buying her first home and is currently renting. She does not file a tax return each year because she falls below the income guidelines; her only income is SSI and SSD; Would she still be able to qualify since she does not file? And do you know how this would work?

As far as I can tell, she would be eligible for the credit. She would have to file a 2009 return. It’s worth visiting a CPA to get this done professionally for your Mom.

SHERRI – I MADE SETTLEMENT ON MY FIRST HOME THIS MONTH. HOWEVER, I HAVE PURCHASED THIS HOME WITH MY SON AND HE GAVE ME THE MONEY FOR THE CLOSING COSTS. HE IS MOVING IN RIGHT AWAY BUT I DO NOT INTEND TO MOVE IN FOR A FEW MONTHS AT LEAST. CAN I STILL CLAIM THE FIRST TIME BUYERS TAX CREDIT?

Yes, you should be able to get the credit as long as you havn’t owned a home in the last three years. You are taking on the benefits and burdens of ownership. And your intent is to possess the house and live in it. Check with a CPA just to be safe though.

Alex – We are US residents (not citizens) who pay US taxes and have just bought our first home in the US. I was just wondering if we would qualify?

If you pay taxes, you should qualify for the credit. (Remember that whole Boston Tea Party thing?) Only non-resident aliens are disqualified.

Sandy – I have two questions – is the $8,000 tax credit an actually check that is sent to the buyers? Also, what is the limit a person can make to qualify for the credit.

Who said you could ask 2 questions? …just kidding. Yes, you get a check if you claim it against your 2008 return. And you also get a check if you claim it in 2009, but it will come to you along with your tax return check. The credit phases out for incomes between $75,000 to $95,000 for a single filer, and $150,000 to $170,000 for couples.

Ria – I purchased a house with my dad this year however my name was not on the mortgage, only the deed of trust. My dad is not able to claim the tax credit due to his income. Would I be eligible to claim this credit if I am not on the mortgage but only the deed of trust?

I don’t think so. I believe you have to be on both documents. You should check with a CPA though to be sure.

Amanda – Is there any way that you can tell me if Contract-for-deed houses qualify for this credit as well? We have an excellent opportunity to get a new house this way and so far the legal side looks good as well as the mortgage rate. We were a little worried about how the IRS defined home purchase. Any help would be appreciated.

Yes, they do. As long as you take on the “benefits and burdens” of home ownership, you should get the credit. No problems. See more on the IRS fact page.

Kathy – My daughter doesn’t qualify for a loan, so we are going to use the equity in our house to pay for her house, in her name. So that would be a cash purchase and she will have to pay us back. My assumption is she would get the credit, but my question is, would there be a repercussion by us giving her the loan instead of a mortgage company? Thanks!

From what I can tell, the IRS doesn’t care where you get the money to buy the home. And since you’re buying it outright, no one is going to turn your daughter down. I would see a CPA just to be sure though. And my other concern would be that you are putting your home in jeopardy by creating a HELOC or Equity Loan to fund what should be your daughter’s purchase.

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