Buying: $8000 Tax Credit

The American Recovery and Reinvestment Act of 2009 authorizes an $8,000 tax credit for qualified first-time home buyers on home purchases made on or after January 1, 2009 and before December 1, 2009. Most of us have heard about this new program while many of us don’t have the facts. Here are the most frequently asked questions about this new program.

$8000 Tax Credit FAQ

  1. Who is eligible to take advantage of the $8,000 tax credit?

  2. What is the definition of a first-time home buyer?

  3. I am currently married and I have never owned my own home but my husband purchased his home two years ago, before we were married. Can I still qualify as a first-time home buyer and take advantage of this program?

  4. Are there any income limits when qualifying for this program?

  5. I am not sure if I will be purchasing a single family home or a townhome.  What types of properties will qualify for this tax credit?

  6. How do I claim the tax credit?

  7. What is a tax credit?

  8. I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government?


Who is eligible to take advantage of the $8,000 tax credit?
First-time home buyers purchasing a primary residence, new or resale, are eligible for the tax credit. This home purchase must close before November 30, 2009.

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What is the definition of a first-time home buyer?
The law defines a first-time home buyer as a buyer who has not owned a principal residence during the three-year period prior to the purchase. 

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I am currently married and I have never owned my own home but my husband purchased his home two years ago, before we were married. Can I still qualify as a first-time home buyer and take advantage of this program?
No. The law tests the homeownership history of both the buyer and his or her spouse. Both parties must qualify as a first-time home buyer as defined above.

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Are there any income limits when qualifying for this program?
Yes. The income limit for single home buyers is a Modified Adjusted Gross Income (MAGI) of $75,000 per year.  The income limit for married couples is a Modified Adjusted Gross Income of $150,000 per year.

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I am not sure if I will be purchasing a single family home or a townhome.  What types of properties will qualify for this tax credit?
Any home purchased by an eligible first-time home buyer will qualify, provided that the home will be used as a principal residence (the home where you spend 50% or more of your time).  This includes single-family detached homes, attached homes (like townhouses), condominiums, manufactured or mobile homes, and houseboats.

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How do I claim the tax credit?
There are no applications or forms to fill out prior to making your purchase. You simply claim the tax credit on your federal income tax return.

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What is a tax credit?
A tax credit is a dollar-for-dollar reduction in what the taxpayer owes to the IRS.  For example, if you owe $2,000 on your federal tax return, your tax credit would be $6,000 ($8,000 minus $2,000).  Conversely, if you are due a tax refund of $2,000, the total amount due back to you from the IRS would be $10,000 ($8,000 plus $2,000).

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I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government?
One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. This provision is designed as an anti-flipping rule.

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For more information, visit the IRS website