Judy Greenberg Group- Real Results: February 2009

The $8,000 Tax Credit -- Let's Break it Down

One of my  newly married clients asked me yesterday if he would qualify for the $8000 tax credit.  The caveat is that his wife had previously owned a home before they were married.  The answer is No.... 

The following post answers this question and many other questions people will be asking all year regarding the First time home buyer credit.   It is one of the best summaries I have read on the tax credit thus far. You might want to keep it handy!

$8,000 homebuyer tax credit

Signed, Sealed, Delivered I'm Yours....is not just Stevie Wonder's 1970 Motown classic, but our $787 Billion (yes, with a B) stimulus plan with various tax cuts and spending programs aimed at reviving our economy. This is our country's largest anti-recession effort since WW2.

Part of the stimulus included a revision to last year's repayable tax credit to an $8,000 tax credit that does NOT need to be repaid.

Be advised, not all tax preparers are aware of all of the provisions of the new tax credit. I had a client call me from Jackson Hewett saying they would not apply the $8,000 tax credit for a house she purchased in 2009 to her 2008 tax year. This is not correct, see When Can the Credit be Claimed below.

So here's a breakdown of the new $8,000 tax credit:

All first-time homebuyers who purchase a home between January 1, 2009 and November 30 , 2009 may be eligible for a tax credit of $8,000 or 10% of the purchase price, whichever is lower. Unlike its $7,500 predecessor, the $8,000 does not need to be repaid.

Tax Credit vs. Tax Deduction

This is a tax credit, not a tax deduction, meaning its a dollar-for-dollar decrease to your tax liability. Also, the tax credit is refundable, meaning you can receive the full value of the credit even if you do not have an $8,000 tax liability.

Phase-Out

The tax credit phases-out for individuals making $75,000 or over modified adjusted gross income (MAGI), and couples making $150,000 or over MAGI. Below are examples of how the phase-out will apply to the two different scenarios.

Individual Making $75,000 or Over

Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Couple Making $150,000 or Over

Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Who Cannot Take the Tax Credit

If any of the following apply, you cannot take the tax credit:

1. Individuals making $95,000 or over MAGI, and couples making $170,000 or over MAGI; meaning you receive no tax credit if your income is this much or more a year.

2. You buy your home from a close relative, including: parent, sibling, spouse, grandparent, child, etc.

3. You sell your home within the first three years of purchasing it. If this occurs, the tax credit must be repaid.

4. You are a non-resident alien

First-time Homebuyer Definition

A first-time homebuyer is defined as someone who has not owned a home within the last three years. If married filing jointly, both spouses must meet the first-time homebuyer definition to take the tax credit.

When Can the Tax Credit be Claimed?

The $8,000 tax credit can be claimed for your 2008 tax year (filed by April 15th 2009), 2008 amended return or 2009 tax year.

Homes That Qualify

The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify. For new construction, the purchase date is considered the day you occupy the home; therefore you must move-in by November 30th 2009 to qualify for the tax credit.

Also, homes in the District of Columbia qualify for the tax credit.

How About Those Who Purchased Homes in 2008?

Homes purchased in 2008 are subject to the $7,500 repayable tax credit.


 

 

 

The above blog post was written by Judy Greenberg.

 

If you are looking to buy or sell a home in the Chicago Northwest Suburbs, you have come to the right place...  Call or text me at 847-602-5435
 


THE JUDY GREENBERG GROUP

Coldwell Banker Residential Brokerage
THE GROVES OFFICE
4192 IL Route 83 #F – Long Grove, IL 60047
847-602-5435

info@buffalogrovehomes.com
 

Oh, by the way, I'm never too busy for referrals!

 

 

 

Comment balloon 2 commentsJudy Greenberg • February 22 2009 05:33PM
The $8, 000 Tax Credit -- Let's Break it Down
share
One of my newly married clients asked me yesterday if he would qualify for the $8000 tax credit. The caveat is that his wife had previously owned a home before they were married. The answer is No… The following post answers this… more
Chicago Area Camp Expert will find you the perfect camp or teen tour!
share
Confused and don't know where you want to send your child to camp or which teen program would best fit your child's needs. Are you crazed about all the different camp choices?? Looking for an exciting new adventure for your teen?? &… more
Chicago Northwest Suburbs- Don't miss the Tyson American Cup
share
On Saturday, February 21 the Tyson American Cup will be taking place at the Sears Center Arena in Hoffman Estates, IL Bring the Kids for a great day of entertainment. The Tyson American Cup is the most prestigious international Pre… more
Dear Diary, My passion (besides real estate) is making people smile!
share
My real passion is… Trying to make people smile! Since I ‘m not a good joke teller, actually I'm a horrible joke teller, I try to make people smile in other ways. In today's environment, where all you hear is negativism from the… more
Chicago Northwest Suburbs- a new baseball team is coming to Zion!
share
A new minor league baseball team is expected to open in Zion, Illinois( located in the Northwest Suburbs of Chicago in the summer of 2010. According to reliable sources, Kevin Costner is one of the investors of the stadium project. I… more