Taking Advantage of the Homebuyer Tax Credit

Earlier this month, Congress and the President created a new law that extended and expanded the $8,000 tax credit for homebuyers. If you’re in the market for a house and you’re counting on this tax benefit, you no longer need to rush to purchase before December 1. The new law extends the credit for anyone who closes on a primary residence by June 30, 2010 and allows more than just first-time purchasers to qualify.

The credit is designed to save the real estate industry from abject failure during the recession and recovery, creating a temporary incentive which might encourage more people to buy houses. The National Association of Realtors estimates that 335,000 out of the 1.8 million home buyers who will have qualified for the tax credit by the end of November 2009 would not have purchased their new houses if not for this credit, so the incentive may be working.

Houe on top of coins

Home buyers purchasing a house in 2009 have the option of filing an amended income tax return (1040X) for 2008 to receive a credit if it wasn’t claimed on the original income tax return for 2008. Although it originally took six weeks for the IRS to send tax credits to home buyers filing amended returns, as the volume has increased there may be a longer delay. It may save time and effort spent on paperwork to claim the credit on the 2009 income tax return filed early in 2010.

There may not be a better time to buy a house in terms of price and availability. Unfortunately, many people are having a difficult time qualifying for good mortgage interest rates or, in some cases, any loan at all. Now that the recession is officially over and the economy is beginning to improve in all but the job market, we’ll see fewer tax incentives designed to stimulate the economy. If you can, and if the timing is right for you, consider taking advantage of the home buyers’ tax credit and any other credits the government has made available.

Comments (28) Leave your comment

  1. How do we go about repaying the 500$ on our taxes We filled out our forms online yet we can’t find the place for the repayment.

    • Hi David,
      Go to the Federal Taxes Tab, Deductions and Credits, Click Explore on My Own, On the 2011 deductions and credit screen scroll down to Homebuyer Credit under the Home section, click start. The program will guide you through the entries.
      Thank you,
      Lisa Greene-Lewis

  2. Pam, life is unfair. The people who bought a house one year before you didn’t receive an interest-free loan as you did. Neither do the people who buy a house this year.

  3. I am really upset when I found out I had to pay back my loan from a home purchase in 2008 and the following year they get even more money and don’t have to pay it back. I would of gladly waited 1 year to of got the better deal. They need to change this to make it fair to everyone.

  4. I sold a home in July 2006 and purchased a new home November 2009. Now if the law defines a “first time home buyer” as someone who has not owned a home within 3 years prior to the purchase of the new home, I should qualify, correct? Would it make a difference in whether I was approved or denied if I opted to amend my 08 return to claim the credit rather than claiming it on my 09 return? I can’t read anywhere that it would but I need to clarify.

  5. I bought a home in April 2010, meeting the June 30, 2010 deadline for the Home Buyers’ Tax Credit. Does this apply to my tax return for 2010, filed in early 2011, or can I apply for it now?

  6. I am using TT online to try and file for a 2nd time home buyer credit. I click the radio button for 2nd time buyer not first time buyer, and I end up being congratuatulated for qualifying for the first time home buyer credit for $8000. I can not get TT online to accept that I am a long term repeat buyer going for the $6500 credit. It forces me to be a first time buyer. What am I doing wrong?

  7. I bought a home in Feb 2009. I’m a “long-time” resident (lived in last house 6 of last 8 years). I understand that I do NOT qualify for the $6500 tax credit. However, when I run “error check” it forces me to first enter “no” for related party purchase, and then enter the value of my home. It then gives me the $8000 FIRST TIME buyer’s credit (That box is checked on form 5405 and there’s no way to UNCHECK it. This raises my refund by $8000 that I don’t deserve. I can find no way out of this unless I LIE and state that I did NOT purchase a house in 2009…which I did. Help?

  8. I bought my house in 2008. I received my first time home buyer credit. I’m really pissed off that people from 2008 have to pay if back when everyone else does not. Please help me understand why people buying homes in 2008 have to pay this “credit” back. I think it’s only fair to make everyone pay it back or to make no one pay it back.

    Personally, I think this is a crock.

  9. As far as I can tell I qualify for the $6,500 home replacement credit, but turbo tax says i do not.. Bought a new home on 12/2/2009, lived in my previous home for 9 years, meet the income for filing jointly, and house is less than $800K…Anyone have any thoughts as to why i do not qualify,..?

  10. I second Jill’s question. I also took the $7,500 first time home owners credit for my 2008 tax return. Where is the option to pay it back in 2009 TT? I can’t seem to find it.

    Thanks.

  11. I have a question regarding my 2009 state return using TurboTax. At one point TurboTax asks me to “Enter Your Federal Info” and it says “Enter the following numbers if they apply”. One of the numbers is “2008 First Time Homebuyer Credit”. Now, I received an $8,000 first time homebuyer credit for a home purchased on Sept. of 2009 but I amended my 2008 return to get it faster. Would I enter that tax credit I received here or is it asking for the $7,500 2008 non-refundable tax credit? I am wondering because this increases my state refund by about $300 so I want to make sure I am entering the right information here! Please help! Thanks!!

    • Hi @Madalina, thanks for ptnsiog. The IRS rules on new construction make it clear that if you are building the home yourself, you need to have a certificate of occupancy by June 30th or you cannot claim the credit. The fact that you might close a loan before June 30th does not mean that you have closed within the meaning of the legislation. It’s not clear to me that you’re actually building the home, though. If you legitimately close with a builder, and your closing is irrevocable such that you own the property and the builder is going to continue to build the house on it, then you might qualify if you close with the builder by June 30th. But it seems to me that you’re saying that you are going to be building the home, that you already own the lot, and your only closing is for the loan to actually start construction. That seems to fit within the IRS requirements that you actually move in by June 30th.

  12. Turbo TaxBob,

    I have a question related to the one posed by james (November 24th, 2009; 10:13 am). I took the $7,500 first time home owners benefit for my 2008 tax return. Has Turbo Tax 2009 calculated in the $500 I need to pay back this year?

    Please help, so I can file.

  13. If I bought my home in Feb of 2009 will I be able to e-file form 5405 for the $8000 credit? If so when is that option available?

  14. I purchased my manufactured home in September of 2004. My husband and I married in August of 2006. We sold our home in July of 2009 and purchased our new home in October of 2009. Do we qualify for the homebuyer credit?

  15. If I use TurboTax and get the homebuyers credit, does it allow me to print and send in a paper copy? Somewhere I saw that you have to mail in your forms this year along with proof of closing. Just want to know if I’d be better going to someone in person to help me (since I can’t seem to do my own taxes at all!)

  16. I have purchased a new construction house in Feb 11, 2009 and am also keeping my townhouse as a rental property which I purchased almost 5 years ago. What homebuyer’s tax credit would apply to me?

  17. Cindy, unfortunately the new rules for existing home buyers apply to purchases after November 6, 2009. It’s a real shame that many recent home buyers will miss out on this $6,500 credit!

    Bob Meighan

    VP, TurboTax

  18. My husband and I sold our home of 18 years in August, 2009 and purchased another home with a closing date of September 30. Do we qualify for the $6500 credit?

  19. James… Good question and glad you asked since this applies to many home purchasers.

    You purchased the home in January 2009 so you should have received a homebuyer credit of $8000 that does NOT need to be paid back. On the other hand, for homes purchased in 2008 the $7,500 “credit” had to be paid back over 15 years. So the good news is that you really qualify for the $8,500 credit that does not have to be paid back.

    What confuses me is your statement that your credit was only $7,500 and had to be paid back. That is inconsistent with the rules even though you reported the purchase on your 2008 tax return. Perhaps you completed the information indicating you purchased the home in 2008 (or maybe the final reporting form was not yet available)? Go back to find out what you did and then you may have to file an amended return to get the $8,000 benefits you’re entitled to claim. But, you can’t double dip. In other words, you’ll have to pay the $7,500 back to get the $8,000 credit.

    This is great, easy money so don’t pass on it. If you have any other questions, please let us know.

    Bob Meighan

    VP, TurboTax

  20. i would like to know if anyone has this same expierience or not. I bought my home in january of 2009. I took the 7500.00 first time home owners benifit for the 2008 tax return, which i have to pay back. now there is a new law in place for 8000.00 which you dont have to pay back. so is there any way i can either amend this on my prior return or can i just double dip and file for the 8000.00 for free since im already paying back the first 7500.00? Help please anyone.

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