First-Time Homebuyer Tax Credit Information

In 2008, Congress enacted a $7,500 tax credit designed to be an incentive for first-time homebuyers to purchase a home. The credit was designed as a mechinism to decrease the over-supply of homes for sale.

For 2009, Congress has increased the credit to $8,000 and made several additional improvements. This revised $8,000 tax credit applies to purchases on or after January 1, 2009 and before December 31, 2009.

What's this 2009 new homebuyer tax incentive?

The 2008 $7,500, repayable credit is increased to $8,000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8,000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7,500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 31, 2009.

Who is eligible?

Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had ownership interest in a home in the last three years previous to the day of the 2009 purchase.

Is there an income restriction?

Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as a Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

How does a tax credit work?

Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual's income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has a total tax liability of $9,500, an $8,000 tax credit would wipe out all but $1,500 of the tax due. ($9,500 - $8,000 = $1,500)

For more information regarding the First-Time Homebuyer Tax Credit, the Wisconsin Relators Association has made a handy tip sheet.

Download a complete copy of the 2009 First-Time Homebuyer Tax Credit FAQ
(Information courtsey of the National Association of REALATORS)