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Breaking Down the First Time Home Buyer Tax Credit

by admin

There is no doubt that the first time home buyer tax credit is a great thing but there are a few things to know before you assume that you qualify for the full $8,000.  The tax credit breaks down as follows:
Who qualifies? First time home buyers and people (or spouses) who have not owned a home for the previous 3 years.  You must purchase your home between January 1, 2009 and December 1, 2009.

  • What qualifies for the first time home buyer’s tax credit? Only a primary house qualifies.  It does not matter if it is a single family home, duplex, townhome, condo, apartment or co-op, if it is a primary residence it will apply.
  • What is the amount of the first time home buyer’s tax credit? $8,000 is the maximum amount of the credit.  There are 2 factors at play when it comes to getting the credit: The cost of the home and the income of the person or married couple purchasing the home.  The credit can be 10% of the closing price up to $8,000 or a person making $75,000 or less or a married couple making $150,000 or less are eligible for the full $8,000.
  • Do you qualify for the first time home buyer’s tax credit if your income is higher? Yes and no.  If you make more than the $75,000/$150,000 limit you get less of a credit.  The maximum income is $95,000 for singles or $170,000 for couples.  If you make more than the maximum income you are not eligible for the tax credit.

The tax credit is a real boon for first time home buyers and does not have to be repaid.  If you qualify for the tax credit and have been considering purchasing a new home there could not be a better time.  Low interest rates, low home values and the first time home buyer tax credit all add up to the right time to call an experienced local Realtor.

Resource and for more information:

Wind TurbineOn February 17th, 2009 President Barack Obama signed into law the American Recovery and Reinvestment Tax Act of 2009. It extends tax credits for certain energy efficient additions or replacements in existing homes only. Be aware that the maximum amount of homeowner credit for ALL improvements combined is $1,500, during 2009 and 2010. Following is a list of items that qualify:
  • Windows and Doors
  • Insulation
  • Roofs (either metal or asphalt)
  • HVAC
  • Water Heaters
  • Biomass Stoves
For the following items through the year 2016 on existing homes as well as new construction, tax credits are available at 30% of the cost with no limit:
  • Geothermal Heat Pumps
  • Solar Panels
  • Solar Water Heaters
  • Small Wind Systems
  • Fuel Cells
For the Tax Year 2008, the only energy efficiency improvements eligible for tax credit are:
  • Geothermal Heat Pumps - 30%, up to $2,000
  • Solar Water Heaters - 30% up to $2,000
  • Solar Panels - 30% up to $2,000
  • Small Wind Energy Systems - 30% up to $4,000
  • Fuel Cells  - 30% up to $1,500 per .5kW of power capacity
To claim this credit you must file IRS Tax Form 5695 with your 2008 taxes.
American flagwater ripple and water drop falling in the middleIf you decide to purchase a home within the next year, you will be entitled to a $15,000 tax credit, thanks to an amendment written by Georgia’s Senator Johnny Isakson. This amendment to the economic stimulus bill will be available to any home buyer within a year of it’s enactment. Homebuyers will be entitled to claim a total tax credit of $15,000 or 10% of the purchase price, whichever is less.  To avoid possible abuse of this credit, it is only allowed for your primary residence and will only have to be re-paid if said house is sold within two years of purchase. Isakson has a lot of experience in the Real Estate market, as he ran one of the most successful Real Estate Brokerage companies in the Southeast for twenty years. He is convinced that this credit will work because of a similar tax break Congress introduced in the mid-1970’s, when our country was in the midst of a housing crisis similar to the one we are faced with today. The results back then were positive, as home values did eventually stabilize and the market recovered.

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Contact Information

Photo of Cathy Russell Real Estate
Cathy Russell
The Russell Company
2522 Covington St.
West Lafayette IN 47906
(765) 426-7000
(765) 335-5588
Fax: (765) 497-1003