8000 Housing Tax Credit For First Time Home Buyer Loans

If you are out to buy a home and you are a first time buyer you may qualify for the new $8000 Housing Tax Credit. One great benefit of this tax credit is that it does not have to be paid back. This is a significant change from the $7,500 home buying tax credit that was passed by the Bush Administration in July 2008. The Bush housing tax credit had to be repaid over time.

Below you will find FAQ's about the details of the 8000 housing tax credit:

1. What are the eligibility requirements for the housing tax credit?
2. How do I know if I am a first time home buyer?
3. How long do I have to buy a house to still get the housing tax credit?
4. Do I have to purchase a particular price home to get the 8000 housing tax credit?
5. According to my income, how do I know if I qualify for the full 8000 tax credit?
6. Is this the same housing tax credit that was passed by the Bush Administration in 2008?
7. What is the difference between a tax credit and tax deduction?
8. Can I get the $8000 housing tax credit if I use a down payment assistance program for my down payment and closings costs?
9. If my mortgage loan program, like an FHA home loan, allows me to get a gift from a relative or borrow money for my down payment can I still qualify for the housing tax credit?
10. Is there anyway to get the housing tax credit early or do I have to wait until my tax return refund?
11. Do I have to pay the tax credit back at some point in the future?
12. Is there a special IRS tax form that I need to use to claim my home purchase tax credit?

Answers to 8000 Housing Tax Credit FAQ's

1. What is the eligibility requirements for the housing tax credit?
   
   You must be able to qualify for a mortgage and you must be a first time home buyer.


2. How do I know if I am a first time home buyer?
   
   You are a first time home buyer if you have you have not owned a home or been on title for a primary residence home within the past 3 years. Special rules apply if you are married with one spouse having been a home owner within the past three year while the other spouse was not. Also, special rules apply if a parent who is a homeowner buys a home with a child (such as a kiddie condo purchase) being a first time home buyer. Check with your tax preparer to see how these rules apply to you.


3. How long do I have to buy a house to still get the housing tax credit?
   
   You must purchase either a new home or a resale home between January 1, 2009 and December 1, 2009.


4. Do I have to purchase a particular price home to get the full 8000 housing tax credit?
   
   Yes, you have to purchase a home that is it does matter. The tax credit will 10% of your home's purchase price up to a total of $8000. In other words, if you buy a $75,000 home you will only be eligible for a housing tax credit of $7500.


5. According to my income, how do I know if I qualify for the full 8000 tax credit?
   
   There are three real requirements to qualify for the full 8000 tax credit. First, as already stated you must be a first time buyer. Second, you must purchase a home of $80,000 or greater. And third, you will only qualify for the full amount of the tax credit if your income is under $75,000 if you are single and buying the home by yourself.
   
   A similar rule applies if you are married where the combined income cannot exceed $150,000. You may still qualify for the housing tax credit if you make up to $95,000 as a single person and up to $170,000 as a married couple.


6. Is this the same housing tax credit that was passed by the Bush Administration in 2008?
   
   Yes and No. This housing tax credit stems from the economic recovery efforts that President Obama inherited from the Bush Administration. The $8,000 was increased from what was originally put into place at $7500 by the Bush Administration. The law that authorized this new housing tax credit is the American Recovery and Reinvestment Act of 2009.


7. What is the difference between a tax credit and tax deduction?
   
   A tax credit is a dollar for dollar reduction in your taxes owed or a dollar for dollar increase in what you get back in a tax return. For example, if you owed nothing to the IRS but got the full $8,000 housing tax credit then you would get an $8,000 tax refund from the IRS.
   
   A tax deduction has to do with your income bracket. In other words, if you were to get an $8,000 tax deduction and you were in the 18% tax bracket then you would get a tax deduction of $1,440 off of what you owe on your taxes.


8. Can I get the $8000 housing tax credit if I use a down payment assistance program for my down payment and closings costs?
   
   Yes you may use any downpayment assistance program to cover your down payment and closing costs. You may also use this housing credit for any government housing grant program.


9. If my mortgage loan program, like an FHA home loan, allows me to get a gift from a relative or borrow money for my down payment can I still qualify for the housing tax credit?
   
   Yes you can use a gift from a relative or parent and you can borrow money for your down payment (as long as you qualify with the loan payback terms included in your mortgage qualifications for your debt ratio) and still qualify for the housing tax credit.


10. Is there anyway to get the housing tax credit early or do I have to wait until my tax return refund?
    
    There is no way to directly get your housing tax credit early. However, you may talk to your employer about reducing your tax withholding on your paycheck. By reducing your tax withholding you will increase your after tax paycheck which you can save the difference to apply towards your down payment and closing costs.
    
    You adjust your withholdings by signing a new W-4 with your employer. The quickest way to reduce your tax withholding is to claim 9 deductions.


11. Do I have to pay the tax credit back at some point in the future?
    
    Not necessarily. If you stay in your home more than 3 years then you will not have to pay the tax credit back to the IRS. This is a change from the prior housing tax credit authorized by the Bush Administration which required you to pay back the tax credit over time.


12. Is there a special IRS tax form that I need to use to claim my home purchase tax credit?
    
    Yes, the IRS has a special form that you must use to claim your First-Time Homebuyer Credit. Get a copy of your IRS Form 5405.