Update: On June 16th the Senate passed the proposal with a 60-37 vote in favor of an extension to the $8,000 Home Buyer Tax Credit. This will extend the closing date deadline Home Buyer Tax Credit to September 30, 2010. It has yet to be signed into law by the president, however with a 60-37 vote in favor of the extension you can pretty much bet that President Obama will sign the extension. The extension would only allow people who were already under contract by April 30. About 180,000 homebuyers who already signed purchase agreements would otherwise miss the deadline. The government is getting this money which is measured to cost $140 million by denying businesses the ability to deduct from their taxes punitive damages paid when losing lawsuits or judgments.
Purchase Before April 30, 2010 and Close by June 30, 2010
$8,000 & $6,500 Tax Credit For Home Buyers
The $8,000 and $6,500 tax credits for home buyers should entice some home buyers to “jump-in” and buy a home, but only time will tell.
Do You Qualify?
To Qualify for the Tax Credit:
- Available to first-time home buyers ($8,000) and move-up buyers ($6,500).
- The tax credit is not a loan and does not require repayment*
- The tax credit reduces the home buyer’s tax liability i.e. if the buyer’s liability is less than $8,000, the remaining credit will be issued as a check
- Home purchase must be for a primary residence
- The credit is available on a home purchase before April 30, 2010 and close by June 30, 2010
- The credit is not eligible if the seller is a relative of the buyer – Thanks Tina Fountain
*If the home is sold within 3-years, the tax credit must be re-paid
UPDATE: $8,000 Tax Credit Expanded, New Legislation Opens Tax Credit to Additional Buyers…
On Friday October 6th, 2009 the President signed into law a bill that changed the scope of the tax credit for “New Home Buyers”. The Bill not only extends the tax credit that was scheduled to expire November 30th 2009, it also changed the criteria for qualification. The new bill extends the expiration date on signing a sales contract to April 30, 2010 and the home must now close by June 30, 2010.
An additional year has been added to these dates for military personnel who have served extended duties outside of the U.S. The legal term “first time home buyer” is described to mean anyone who has not purchased a home in the past three years. For those who qualify you can claim up to 10% of the closing price of the home with a maximum credit of $8,000. This credit is refundable. What this means is that if you owe less than $8,000 in federal taxes the difference will be paid to you.
Additional expansion of the bill changes that MAGI (maximum adjusted gross income) of a single filer up from $95,000 to $125,000 and makes reduced tax credit available with a MAGI of $145,000. For married or joint filers with a MAGI of $170,000 or more found that they were ineligible under the old law. The new bill extends the MAGI for married or joint filers to phase out between $225,000 and $245,000. The available credit does not have to be repaid if you remain in the home for a period of three years.
If you are an existing homeowner who has lived in your primary residence for 5 of the last 8 years you can now qualify for a $6,500 tax credit on an additional home purchase. The new legislation mentions nothing about you being required to sell your 1st residence. The legislation only mentions that you would no longer qualify for tax breaks on your 1st residence.
Within the new law anti-fraud measures have been added. These measures were necessary due to the amount of people who claimed the home buyer’s tax credit and did not qualify. The new law prevents anyone who has been claimed as a dependant on someone else’s return from receiving the credit. The law also states that you must be 18 on the date of the purchase of the home to qualify. Additional anti-fraud measures require that you attach your settlement agreement to your tax return.
Source: Senators agree to extend homebuyer tax credit
See Also: Government Website – Home Buyer Tax Credits
BEGIN ORIGINAL $8,000 FIRST TIME HOMEBUYER CREDIT ARTICLE
In Colorado, President Obama signed the massive economic stimulus plan into law making the $8,000 home buyer tax credit official.
The American Recovery and Reinvestment Act of 2009 is a $787 billion stimulus package meant to save or create as many as 3.5 million jobs. The package allocates money for tax relief, state and local fiscal relief, infrastructure and science, protecting the vulnerable, health care, education and training, energy and other things.
This stimulus bill will help lead our nation towards debt levels not seen since the darkest days of World War II and represents the largest federal stimulus package in our nation’s history.
Stolen from CNN.com
The final plan set aside stimulus money at the cost of $2 billion – $8 billion for first-time home buyers as well as incentives for home owners that make energy saving improvements to their existing home. Although some incentives for home buyers were included in the final plan, the plan’s home buyer incentive fell short of the $15,000 home buyer tax credit requested by home builders and housing professionals across the nation.
Home Energy Credit
Tax Incentives for Improving Existing Residential Real Estate
- Homeowners can recoup up to 30% of the cost of installing energy saving features in their home
- The credit is valid on up to $1,500 of improvements
- Over $4 billion was allocated for the Home Energy Credit
- Examples of improvements: Energy Efficient Windows and Doors, Air Conditioning, Furnaces, Water Heaters
Breakdown of the Stimulus Package’s Expenditures
- Tax Relief – $288 Billion
- State and Local Fiscal Relief – $144 Billion
- Infrastructure and Science – $111 Billion
- Protecting the Venerable – $81 Billion
- Health Care – $59 Billion
- Education and Training – $53 Billion
- Energy – $43 Billion
- Other – $8 Billion
Tomorrow, in Arizona (America’s best state 
), President Obama will outline a plan to help decrease foreclosures and help struggling homeowners meet their current financial commitments. The new plan is part of TARP 2, The 3 step financial Stability Plan involving a government investment of up to $2 trillion dollars. Limited TARP 2 details include analyzing and investing in struggling banks, creating a “bad bank” for purchasing unhealthy assets from financial institutions and investing funds in stimulating business and consumer lending.
Related Resources
Full Details of the American Recovery and Reinvestment Act of 2009 Recovery.gov
Wikipedia About Economic Stimulus Plan
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Is the 5% down payment still a part of the stimulus plan?
Joseph – I haven’t been able to find any mention of down payments. I’d imagine it’s the same but I don’t know for sure. – I’ll keep looking and post an update when I find out.
Hi Jason, very good overview of the First Time Home Buyers Tax Credit. We ran into a situation today and also found out that the credit is not eligible if the seller is a relative of the buyer.
Tinas last blog post..2375 New Salem Trace Marietta Georgia 30064
I checked with 3 lenders today about this and and I cannot find the 5% down idea anywhere and nobody I spoke to said they knew it was in the plan.
I just wanted to say that being a Mortgage Professional, I dont think that the decision taken by our own President is really a worth admiring. If the decision would have been made on selective home buyers, then I think it would have surely made few changes in the economic conditions of USA. I think few changes in the law could have served people in a better way.
Mortgagefit Community Persons last blog post..FHA Loan
The $1500 Energy tax credits for replacement windows, insulation, and other products should be an incentive for most homeowners to get the projects done now. Home Depot has an installation service group that can give you an estimate and tell you what products they carry that qualifies.
The great news is that I can claim the home owner credit in 2008! This was the best news I recieved! Great explanation here and I’ll link back to it from my article on this topic.
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Glad you found the information useful Andy, thanks for stopping by.
There is a tax credit of 30% for adding a geathermal Heat pump to heat and cool your new or existing home. The credit applies to all perhipheral costs for the installation, including pumps, wells, ductwork, equipment, and labor. The efficiency rating of these systems is in the 30 EER’s.
I bought my house when I was single and now I’m married. We’re in the process of purchasing another home. If we put the house in my wife’s name, will we get the tax credit?
I did hear that you can get extra money for weatherizing your home. I believe there is $1 Billion set aside for that.
Wow. I did not know that the government was giving out credits for new windows.
Does the same apply for garage doors? If so I run a national site for garage door repair and installation companies. Garage Door Repair Companies
I was under the impression that this credit was only for first time home buyers. Am I wrong here?
Can the tax credit be used for DPA?
@Trena – some states are trying to make it so home buyers can use the credit for a down payment on an FHA loan, but from what I know, the IRS is still deciding on it.
As of right now, I do believe the answer is no, but that could change any day. Here’s a link to an article I just found about it (http://www.seattlepi.com/local/406538_taxcredit26.html) it’s about Washington, but if the IRS allows it, it’ll be effective in other states too.
Thanks for stopping by.
The energy tax credit for replacement windows, doors and insulation, has sparked positive growth for my contractor business. It would be nice if they could incorporate the labor into this credit as well – not just credit the purchase.
I've also posted an article about this on my blog here :energy efficient tax credit
I would be nice if there was some degree of fairness. I see people that have defaulted on home loans get refinanced at ridiculous rates as low as 3.5%. While the guy that has not missed a payment is not permitted to drop from his 8% to a 6%. Same thing here you get an $8,000 credit for buying a home for no particular reason.
That is fantastic, not only does it start young 1st time home buyers out but it adds money to our economy!
This is great great news. The $8,000 tax credit for first-time home buyers is reallya great help if that first home is not very expensive.Thanks for the info!
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I believe I qualify for the $8000.00 Tax Credit. Where do I find the official rules?
Tammy – here’s a link to the official press release http://www.treas.gov/press/releases/tg39.htm. You might want to contact a real estate agent or home builder so that they can look at your individual situation.
The $8,000 tax credit is great. Put money in the pockets of the citizens and they will spend it.
Scott L.
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J Dalton you are incredibly ignorant if you think that way. I have lived and struggled with money my entire life and have watched my parents live and struggle with money, my dad works more than 80 hours a week and has worked this much for most of my life. I hardly know the guy because all he does is work and work to try and do the best he can to provide for his family even though no matter how hard he works my family STILL struggles to make ends meet. They had to file for bankruptcy a few years back. Some people are not blessed and born into money. Some work very hard for what little they have. They have been driving the same beat up piece of junk cars for literally their entire lifetime of the car, which one is a 1984 Honda and the other is a 1995 van, both of which are money magnets, which we do all the work ourselves to fix them since we cant even afford mechanics half the time. They have been praying for a way out of their money trap for years and Obama has finally made it possible for them to purchase a better vehicle with good gas mileage. Giving them 4500 towards each of the cars they have when they are only worth $500 is a great deal! Not to mention my fiance and I are buying a townhouse as an investment and are finally able to get married and move out, the townhouses we are buying sold for over 200k only 2 years ago and are now half the price with incentives like $8000 tax credits! I call that an AWESOME deal! This is just ONE example of how Obama’s plan is helping people. If any of you are rich and feel like your money is being wasted, please do not feel that way. There are some people out there who work so hard that they never see their families EVER, and I mean EVER, just think about your tax dollars doing a good deed for someone else, almost as if you are donating. It should make you feel good. I want to thank EVERYONE who is paying their taxes for helping my family live a little happier for ONCE! THANK YOU EVERYONE! PLEASE DO NOT LOSE HOPE! THERE ARE MANY PEOPLE IN THE SAME BOAT OR IN WORSE CASES OUT THERE THAT ARE THANKING GOD FOR FINALLY SOME SIGNS OF RELIEF FROM STRESS, MEDICAL PROBLEMS DUE TO STRESS, ETC. Please be more considerate and understanding of others and think less of yourselves!
I really regret that I bought my house too early. Not only the home depreciated, and I paid more for than what it is now. Seeing the Government is providing good tax credit and benefits makes me what to hit myself :{
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I agree J. Baker. While the the credit is a great idea, why only apply to first time home buyers? Also, there are already programs in place through FHA for first time home buyers. I believe you can receive loans to cover the closing costs when you are a first time how buyer. Anyway, the tax credit is a great idea nonetheless.
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I agree with J.Baker comment. They should make this credit for ALL home buyers as that would only help the economy. Besides, first time home buyers are the biggest risk on defaulting since they probably have the least amount of income. Balance the risk with some established income earners I say!
Dennis
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Me and my wife bought our house from her parents,,,we were so happy thinking we were going to get a stimulus check,,,when we went to HR block
to file it our dreams were SHATTERED !! No stimulus package for us just because we bought the house from a relative,,nobody said anything about this b4,,just like anything else I guess I should have read the FINE PRINT,,can somebody please tell me what that has to do with anything[buying from a relative],,,gonna take me a while to get over this one,,happened about 4 months ago and I’m still very very ANGRY with this stupid stipulation.
There’s been a lot of criticism about this and many of the Obama Administration’s stimulus programs. Hopefully many first time buyers have been able to take advantage of this program. I just wonder how easy it is to tell if this, or similar programs, are actually aiding our economy back to life.
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While such stimulus packages can benefit some, it is ALWAYS at the expense of others!
There is no question that the 1st time buyers tax credit has helped push the Real Estate markets across the country towards a recovery. I know there has been a lot of talk about extending the deadline. This would be a prudent move to keep continue the domino effect of those selling 1st time buyer homes to move up to the next price point.
I’m all for the $8,000 tax credit, it’s a good idea. Give money to the people and they’ll start spending it.
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Is this program only available for first time homebuyers?
Yes Samantha – it is currently only available for first-time home buyers. If you have not owned a home in 3-years, you’re considered a first-time buyer.
I think this is wrong as program (credit) is only for first-time home buyers available. Should this stimulate the economy? Will this stimulate it? Don’t you think it’s questionable?
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My question is….My husband and I have owned our house for 29 years now. We wanted to get us a home in the town where we both work and give our old one to our youngest daughter who is now 18. Someone at work told me that we would qualify because we haven’t actually purchased a home in the last 3 years, but the way I’m reading it is that we can’t have had a home in our name for the last 3 years. Which is it?
Beverly, I’m sorry but you would not qualify because you have owned a home in the past 3 years. The qualification is whether you’ve owned a home in the last 3 years – not whether you’ve purchased one.
I read here – tax credit extension – that the credit
is being extended into 2010. Any confirmation on this?
@Gail – They have extended the first time home buyer tax credit to military personnel. Both active and inactive. The House is currently debating whether or not to extend the tax credit to everyone else as well. Thanks for stopping by!
yes, i absolutely agree that the stimulus bill will help lead our nation towards debt levels not seen since the darkest days of World War II and represents the largest federal stimulus package in our nation’s history.
Count me in the camp that think extending the Tax Credit is a bad idea for this country. Obama is quickly becoming the biggest spender in our nation’s history. I am all for stimulating our economy but not at the expense of future generations.
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Finally, some of the stimulus money going to actual stimulus.
I don’t understand you commentators who see this as a bad thing or a handout. Do you prefer giving billions to already rich bankers and investment companies? Obviously you missed the recent news reports about how the major investment companies (JP Morgan et al.) are taking interest free loans from the government and investing the money in T-bills for a 3% annual return. Can you believe it? They are borrowing money from the government and then loaning it back to the very same treasury but at 3% interest rate! These are the people you’d rather we were loaning money to? Frankly I’d rather see a homeless family with a crappy credit rating default on $8,000 rather then handing it to a millionaire (or billionaire) broker on a silver platter.
Well, I think for USA, where there is a relatively high number of abandoned/empty houses, this tax credit will have a positive impact. Will it help fight the recession? Doubt that; not enough people would qualify as first time buyers.
I recently stumbled across an article which stated that according to the white house report, the economic stimulus plan has saved over 250,000 jobs. I dont know how far the numbers are true and I didnt check for the credibility of the article too. But I pray that let it be true and more of the same to happen. I am from NZ and as far as we are concerned we were not hit that high but the downtrend was a potential setback to us.
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These tax credits are fantastic. They make systems like geothermal systems affordable for people.
These packages are highly essential for situations prevailing across the world. But the current unemployment rate might be intimidating and is actually forcing the Obama administration to launch another stimulus package.
Similar economic stimulus plans seem to be spreading now – In both New Zealand and Australia similar strategies have been put in place and are getting great results.
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I sure hope this “extension” can carry us Realtors through this up and coming slow winter season. Though I’m not so sure it’ll help with the economy, it does give some opportunity for the average homeowner.
I believe I may be too late but if anyone can let me know if I can still purchase a new home in my name only even though I am married?
Was wondering if I could use this credit to not only save, but also buy a solar power system as well? Could probably have the system pay for itself after all of the power grants.
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The economic stimulus has helped a lot of people not just fat cat wall street bankers.Without it I would hate to see were we would be.
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