In the economic stimulus package 2009, the Federal Government introduced the $8000 tax credit as an incentive for first-time home buyers. It was intended as a measure to stimulate the home market which was lagging due to the flurry of foreclosures, tighter mortgage requirements and a volatile job market. Here are the seven important things to know about the $8000 Tax Credit.
$8000 Tax Credit is Non-repayable
One of the major differences between the $7500 tax credit introduced by president Bush and the $8000 tax credit is that the $8000 need not be repaid. The $7500 tax credit was in effect an interest-free loan because it was to be repaid over a period of fifteen years. The $8000 tax credit is fully refundable. Even if he home buyer has no tax liability, the tax credit can still be claimed.
Definition of A First-time Home Buyer
For the purpose of claiming the tax credit, IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase of the home. If home buyers are married, the spouse also should not have owned a house for three years.
The Maximum Claimable Tax Credit is $8000
The maximum tax credit that a home buyer can claim is 10% of the purchase price of the house, with an upper cap of $8000. This credit is claimable in the tax refund of 2010, but as explained before, even if there is no tax liability the tax credit can still be claimed.
Income Limits
Income limits apply to the first-time home buyers in order to claim the tax credit. The income limit for single taxpayers is $75,000 and for married taxpayers filing a joint return the limit is $150,000.
Deadline For Purchasing the Home
The tax credit is only available to home buyers who purchased a principal residence between Jan 1 2009 and Dec 1 2009. This is another difference between the $7500 tax credit and the $8000 tax credit. The $7500 credit was available to home buyers who purchased a home between April 8, 2008, and before December 31, 2008.
Principal residence
One important requirement for claiming the tax credit is that home buyers should treat the purchased home as their principal residence. Any house will qualify as long as it is used as a principal residence. It can be any one of the following- single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (mobile homes) or houseboats.
Three Year Requirement
To ensure that the buyer is not purchasing the home simply to claim the tax credit, Uncle Sam has added a clause that the buyer should use the purchased house as his/her principal residence for at least three years, failing which the tax credit will be recaptured.
After years of housing boom, the value of the houses had reached unreasonable figures. The recent recession once again brought the home prices to affordable levels for the first-time home buyers. The $8000 tax credit is an important initiative by the Federal Government to attract more home buyers to a gloomy home market.
You can now use the $8000 tax refund for down payment and closing costs. Read Bridge Loans From the $8000 Tax Credit to know more about taking a bridge loan from the $8000 tax credit for funding down payment and closing costs.
Mariam Anthony - I am a graduate in engineering but chose to work in the financial industry. I worked for five years as an asst. manager in a scheduled ...
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