The Obama 8000 Tax Credit for First Time Home Buyers in 2009

by Best FHA Lender on May 19, 2009
3 comments | Leave a Comment

What are the differences between the 2008 tax credit law and the 2009 first time home buyer tax credit law?

uncle sam cash The Obama 8000 Tax Credit for First Time Home Buyers in 2009Last year a first time home buyer tax credit of up to $7500.00 was created as part of the Housing and Economic Recovery Act of 2008.  It went into effect on April 8th, 2008 and was set to expire July 1st, 2009.  While it had good intentions, it was basically an interest-free loan from the IRS that was required to be repaid over 15 years.  

On February 17th, 2009, President Obama signed the American Recovery and Reinvestment Act that included, as one of its key provisions, a modification of the first time homebuyer tax credit.  The majority of the workings of the first time home buyer tax credit remained the same.  But, there were some impressive revisions such as the increase of the maximum credit amount to $8000.00 and the removal of the 15 year repayment requirement.  

The following is a summary of the new 2009 Obama first time homebuyer tax credit

Amount of the Credit

 

2008 – Lesser of 10% of the cost of the home or $7500.

2009 – Maximum credit amount increased to $8000.

Eligible Property

2008 – Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence that was not purchased from a source related to them (i.e. a spouse, parent, child, etc.).

2009 – No change, any principal residence is eligible.

Refundable

2008 – Yes, the tax credit reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.

2009 – No change, purchasers will continue to receive refund for unused amount when tax return is filed.

Income Limit

2008 – The full amount of the credit is available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). It phases out above those caps ($95,000 and $170,000).

2009 – No change, the same income limits continue to apply.

First Time Home Buyer Only

2008 – Yes.  A first time homebuyer is defined by the IRS as those not having had any ownership, including that with a spouse if married, during the three-year period ending on the date of purchase.

2009 – No change.

Revenue Bond Financing

2008 – No credit allowed if home financed with state/local bond funding.

2009 – Purchasers who utilize revenue bond financing can obtain the credit.

Repayment

2008 – Yes, a portion (6.67% of credit or $500) is to be repaid each year for 15 years, starting with 2010 tax filing.

2009 – No repayment for purchases on or after January 1, 2009 and before December 1, 2009.

Recapture

2008 – If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.

2009 – If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.

Termination

2008 – July 1st, 2009

2009 – December 1st, 2009

Effective Date

2008 – Purchases on or after April 9, 2008 and before January 1st, 2009. 

2009 – All revisions are effective as of January 1st, 2009

So if you buy a house under the criteria listed above, how do you claim your first time home buyer tax credit?  

File form IRS 5405 “First-Time Homebuyer Credit” along with filing the 2008 tax return (if not yet filed), an amended 2008 tax return (if already filed), or the 2009 tax return.

Everything You Want To Know About The 2009 Obama 8000 Tax Credit for First Time Home Buyers Being Used For FHA Down Payment and Closing Costs

If you have additional questions, please contact me.

Comments

Karyn 10/21/09

I have a currently have a contract on a home. I am going directly through the USDA. I thinking it will take more than 30 days to close. I want to know How can qualify if the government takes so long to close with these loans.

Steve Lines 10/21/09

Karyn,

The problem isn’t with the government; it is with the lender that you are using. USDA loans should not take a long time to close. See my company’s other site, Ten Day Close, for more info.

Good luck. Contact me with more questions.

Steve Lines

richard kreidel 06/08/11

i cant seem to find the complete laws for the tax credit. I have owned my house for two year i bought it in June 2009. Am i able to rent my home know? Is there a list of all the laws?

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