If you were a first-time buyer who purchased a home after April 8, 2008 through the end of the year, you might have realized that you could get a $7,500 tax credit on your 2008 tax return. This is a nonrefundable tax credit, which means that even if you don’t pay $7,500 in taxes you’ll still get that much in the way of a refund.
However, the 2008 $7,500 tax credit must be paid back in $500 equal installments over 15 years, which means that this tax credit effectively functions as a zero-interest loan.
If you chose to close on Dec. 31, 2008, rather than Jan. 2, 2009 (perhaps to be able to itemize the interest and points on your 2008 tax return), you may be kicking yourself. The recently signed stimulus bill took the $7,500 tax credit and turned it into an $8,000 tax credit — one that doesn’t need to be repaid.
But there are some wrinkles that require you to pay attention. To qualify for the $8,000 tax credit, you must earn less than $150,000 in adjusted gross income for couples filing jointly. Also, you must stay in the house (assuming it’s your primary residence) for three years or there may be some payback requirement.
The $8,000 first-time-buyer credit is good only for homes purchased by first-time buyers (or anyone who hasn’t owned a home in the last three years) from Jan. 1, 2009 through Nov. 30, 2009 — so don’t wait to close in December or you’ll miss out.
If you have specific questions be sure to check with your accountant.
