Can You Claim the $8,000 Credit for First Time Home Buyers?

The $787 billion stimulus package passed in February included a new $8,000 tax credit for first time home buyers, in addition to the $400 tax credit per worker.  Can you claim it?  The First-Time Homebuyer Credit Form 5405 from the IRS helps answer some of the questions regarding eligibility for the credit (or not), and is also the form you would fill out and file with your taxes in order to submit the claim at tax-time.

Who is Eligible?

While it seems that you should be eligible for a first time home buyer credit as long as you buy your first home, like anything else there are conditions to the eligibility for the $8,000 credit. 

If you are buying your first home (to be your primary residence) after April 8, 2008 and before December 1, 2009, and you meet the other conditions for eligibility – your home purchase qualifies.  However, the credit for homes purchased in 2008 is $7,500 – and homes purchased in 2009 receive the $8,000 tax credit. If you're married, neither you or your spouse can own any other main home during the 3 year period prior to the date of your purchase.  If you're building a home, the day of “purchase” is the day you start living in the home.

Your main home must be your primary residence, but it can be a motor home, house boat, trailer, condominium, etc.  It just has to be residential, and what you live in most of the time to qualify.

If you earn more than $95,000 per year as an individual or $170,000  (modified adjusted gross income) for a married couple, you are not eligible for the First Time Home Buyer credit.  Homes located outside the United States do not qualify, nor does your home purchase if you are a non-resident alien.  You can't buy a home from your parents or great-uncle if you want to receive the first time home buyer credit.

First Time Homebuyer Credit Details



For people who bought their homes after April 8, 2008 and before the year 2009 began, the credit is actually more like an interest-free loan than it is a “credit”.  The money is paid back in 15 equal installments beginning in the year 2010.  If you buy a new home as your primary residence, or otherwise stop living in the home you purchased before the 15 years are up, you'll have to pay back the remaining balance of your “credit” during the year you move out.

If you buy a home in 2009, you don't have to repay the credit as long as the home remains your primary residence for 36 months beginning on the date you purchase the home.  However, just like home buyers at the end of 2008, if you leave before the 3 years are up, you'll have to pay back the credit the year you move out.  There are a handful of exceptions to this, but in general – if you move out, you lose out!

The amount of the first time home buyer credit may actually be less than $7,500 for 2008 buyers and $8,000 for 2009 buyers.  If your modified adjusted gross income (MAGI) is less than $75,000 as an individual or $150,000 as a married couple, you'll get the full credit.  Otherwise, for MAGI's between $75,000 and $95,000 (or $150,000 and $170,000 for married couples), the credit begins to phase out and is the lesser of the $7,500 or $8,000 credit OR 10% of the purchase price of the home.

How to Get the First Time Homebuyer Credit

It may be worth it to use a tax professional when you file your taxes, if you are looking to claim the first time homebuyer tax credit.  Tax preparation software should be updated to reflect these changes, but be sure to double check that the credit is applied.  You should be able to tell, as it would add about $7,500 or $8,000 to your refund (or reduce the amount you're expected to pay if you owe at tax time).  If you still do your taxes with printed forms and a pencil, make sure you get the IRS form 5405 to claim the first time home buyer credit.

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