Details of the $8,000 tax credit for first time home buyers

The American Recovery and Reinvestment Act was passed on February 13th, 2009. Among other things, the Act allows for an $8,000 tax credit to first time home buyers.

Prior to the American Recovery and Reinvestment Act of 2009, there was already a first time home buyer tax credit in place, of $7,500, but the big difference is that the $8,000 does not have to be paid back! For first time home buyers who bought their home between April 9, 2008 and December 31st, 2008, the first time home buyer tax credit of $7,500 has to be paid back over 15 years, or when they sell the home.

Here are the details of the $8,000 first time home buyer tax credit as determined by the American Recovery and Reinvestment Act of 2009:

• The $8000 tax credit is available only to first time home buyers, for the purchase of a primary residence only. (A first time home buyer is defined as a person who has not had any ownership interest in a primary residence in the last 3 years.)
  
  
• The tax credit is available only to first time home buyers who buy a primary residence between January 1, 2009 and December 1, 2009. (NOTE: The end date is December 1, NOT December 31!)
  
  
• The tax credit is available to U.S. Citizens, and possibly to resident aliens. This site says that the credit is available to "anyone who is not a nonresident alien (as defined by the IRS)", but that information was provided by the National Association of Home Builders, not by the IRS...
  
  
• This is a tax credit and not a tax deduction. It is a true dollar for dollar reduction on taxes owed.
  
  
• The credit can result in a true tax refund! If, for example, a qualifying first time home buyer were to get back zero on their 2009 taxes, they would then receive a tax refund for $8,000!
  
  
• The tax credit is not a loan and does not have to be paid back if the property is owned more than 3 years. If the home is sold within 3 years, the $8,000 tax credit must be re-paid.
  
  
• Single taxpayers with an Adjusted Gross Income (AGI) up to $75,000 and married taxpayers with a joint AGI of up to $150,000 are eligible for the full $8,000 credit. A lesser tax credit is still available for first time home buyers with income above these amounts, up to $95,000 for individual or $170,000 for joint AGI. For example, if your individual AGI was $85,000, you would get a tax credit of $4,000. If your AGI was $95,000, you would get zero.
  
  
• The credit can be claimed on the 2008 tax return even if the purchase was made on January 1, 2009 or later! A qualifying home buyer who has already filed their 2008 taxes can re-file and receive the tax credit after re-filing.
  
  
• The IRS form used to request the $8,000 tax credit is IRS Form 5405.
  

Here is some verbiage from the Act itself:

SEC. 1006. EXTENSION OF AND INCREASE IN FIRST-TIME HOMEBUYER
CREDIT; WAIVER OF REQUIREMENT TO REPAY.
(a) EXTENSION.—
(1) IN GENERAL.—Section 36(h) is amended by striking
‘‘July 1, 2009’’ and inserting ‘‘December 1, 2009’’.
(2) CONFORMING AMENDMENT.—Section 36(g) is amended
by striking ‘‘July 1, 2009’’ and inserting ‘‘December 1, 2009’’.
(b) INCREASE.—
(1) IN GENERAL.—Section 36(b) is amended by striking
‘‘$7,500’’ each place it appears and inserting ‘‘$8,000’’.
(2) CONFORMING AMENDMENT.—Section 36(b)(1)(B) is
amended by striking ‘‘$3,750’’ and inserting ‘‘$4,000’’.
(c) WAIVER OF RECAPTURE.—
(1) IN GENERAL.—Paragraph (4) of section 36(f) is amended
by adding at the end the following new subparagraph:
‘‘(D) WAIVER OF RECAPTURE FOR PURCHASES IN 2009.—
In the case of any credit allowed with respect to the purchase
of a principal residence after December 31, 2008,
and before December 1, 2009—
‘‘(i) paragraph (1) shall not apply, and
‘‘(ii) paragraph (2) shall apply only if the disposition
or cessation described in paragraph (2) with
respect to such residence occurs during the 36-month
period beginning on the date of the purchase of such
residence by the taxpayer.’’.
(2) CONFORMING AMENDMENT.—Subsection (g) of section
36 is amended by striking ‘‘subsection (c)’’ and inserting ‘‘subsections
(c) and (f)(4)(D)’’.
(d) COORDINATION WITH FIRST-TIME HOMEBUYER CREDIT FOR
DISTRICT OF COLUMBIA.—
(1) IN GENERAL.—Subsection (e) of section 1400C is
amended by adding at the end the following new paragraph:
‘‘(4) COORDINATION WITH NATIONAL FIRST-TIME HOMEBUYERS
CREDIT.—No credit shall be allowed under this section to any
taxpayer with respect to the purchase of a residence after
December 31, 2008, and before December 1, 2009, if a credit
H. R. 1—203
under section 36 is allowable to such taxpayer (or the taxpayer’s
spouse) with respect to such purchase.’’.
(2) CONFORMING AMENDMENT.—Section 36(d) is amended
by striking paragraph (1).
(e) REMOVAL OF PROHIBITION ON FINANCING BY MORTGAGE REVENUE
BONDS.—Section 36(d), as amended by subsection (c)(2), is
amended by striking paragraph (2) and by redesignating paragraphs
(3) and (4) as paragraphs (1) and (2), respectively.
(f) EFFECTIVE DATE.—The amendments made by this section
shall apply to residences purchased after December 31, 2008.