Congress to the Rescue – the First Time Homebuyers Tax Credits of 2008 and 2009

Congress passed the Housing and Economic Recovery Act of 2008. It provided a tax credit up to $7500 for homes purchased between April 8, 2008 and July 1, 2009. If you purchased the home in 2008, you can take the credit on your 2008 tax return. If you purchased the home in 2009 (before December 1), you can take the credit on your 2008 or your 2009 return. (If you already filed your 2008 return and took the credit, you can amend.) And, you don’t really have to be a first time home buyer. If you did not own a home in the last three years, you can take the credit even if you have owned a dozen homes in the past.

Sound good? A tax credit is usually a gift that allows you to reduce the amount of your taxes (not the amount of your disposable income.) The surprise here is that the 2008 credit isn’t really a credit – it is a loan which must be paid back at the rate of $500 per year for 15 years starting with your 2010 tax return.

But wait, in 2009 the credit was extended to $8000 for homes purchased prior to December 1, 2009 and you don’t have to pay it back (unless the home ceases to be your main residence within three years of purchase, in which case the full credit has to be repaid in the year the home ceases to be your main residence.)

But wait, what if I bought a home in early 2009 and already took the old you have to pay it back credit on my 2008 tax return? Easy, you can amend your 2008 tax return and take the 2009 $8000 you don’t have to pay it back credit instead of the 2008 $7500 you do have to pay it back credit.

Could we possibly make this a little bit goofier? Your government – here to help.

 

Michael Baumer

Law Office of Michael Baumer

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by Michael Baumer