There is a lot of confusion between last years $7,500 tax credit and the $8,000 tax credit so here are some key points to the $8,000 plan.
1. $8,000 for new buyers: This credit is equivalent to 10 percent of the purchase price of the home–although it’s capped at $8,000–and applies only to first-time home buyers and principal residences. Unlike last years $7,500 tax credit, this one does not have to be repaid.
2. Who is a first time buyer? A “first-time home buyer” is someone who hasn’t owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) If you’ve owned a vacation home–but not a principal residence–within the past three years, you would still qualify for the credit.
3. Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. If you purchased a home last year after April 9, 2008 and before December 31st, 2008, you would qualify for the $7,500 that must be repaid.
4. The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that’s $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.
5. It is Refundable. Because the tax credit is refundable, buyers can take advantage of it even if they don’t have much tax liability. So, if you owe $2,000 you would get a refund of $6,000. If you $0, you would get $8,000.
6. Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to repay (yes, repay) the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)
As with anything that has to do with taxes, you should contact your tax advisor or accountant with any questions on how this credit would apply to you.
