$8,000 Home Buyer Tax Credit

President Obama signed the massive economic stimulus plan into law making the $8,000 home buyer tax credit official.

If you are a first time home buyer, who is buying a home to be your primary residence between January 1, 2009 and December 1, 2009, you are eligible to receive $8,000 tax credit. Here how this works exactly:

  • You are a first time home buyer if you have not owned a principal residence for the last three years. For married tax payers, both you and your spouse must be 'first time home buyers' in order to qualify for the housing tax credit.
  • Although this tax credit is referred to as $8,000 housing tax credit, remember that the total amount of tax credit a home buyer gets is equal to 10% of the purchase price of the new house up to maximum of $8,000. Thus in order to get a full tax credit of $8,000 your purchased property must be above $80,000 in value.
  • Income Limits for $8000 home buyer tax credit: First time home buyers with modified gross annual income of $75,000 get full benefit of this housing tax credit. The tax credit is gradually reduced for those with income between $75,000 to $95,000 and finally a home buyer gets no tax credit if his/her modified gross annual income is more than $95,000. For married taxpayers, the home buyer tax credit is gradually reduced to zero for modified gross annual income between $150,000 to $170,000.
  • This is a Refundable Tax Credit - Remember that this is a tax credit and not a tax deduction. That is qualified first time home buyers deduct $8,000 from their total tax owed to the IRS and NOT the total taxable income. Moreover a refundable tax credit means that in case the total taxes you owe to the IRS are less than $8,000, you can actually get a refund for the balance amount!
  • The law allows any qualified purchases made in 2009 to be treated as if the purchase was made on December 31 2008. You can claim the $8000 first time home buyer tax credit in 2008 tax return itself by filing form 5405 according to the latest IRS ruling. Thus you can get the benefit of $8000 in 2008 tax return itself.