Here are the details of the tax credit:
First-time buyers can claim a credit worth $8,000 — or 10% of the home's value, whichever is less — on their 2008 or 2009 taxes.Home prices are still declining. By my estimate, the median U.S. home is $50,000 overpriced, so this credit will reduce the loss you experience over the next few years, but not eliminate it.
A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill — the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns — was less than that amount. ...
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
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They still need a downpayment and good credit for a loan. And the $150,000 income maximun negates the effect on high priced homes/areas. Mcmansions are looking doomed.
ReplyDelete"This means taxpayers are paying for part of your house, even though they don't get to live in your house. (Sounds fair, right?)"
ReplyDeleteActually this has nothing to do with taxpayers paying for someone's house, its just another tax deductible item, just like 401k contributions, charitable givings, etc. The validity of the deduction may be in question, but taxpayer's are not paying for someone's house.
Marc - from where does the $8000 originate? Thin air? Bill Gates donation? Uh uh. It comes fron the taxpayers.
ReplyDeleteMarc-
ReplyDeleteIt is a CREDIT, not a deduction.
If my tax bill for 2008 was $5k, I would get all of it back plus another $3k.
There is a big difference between a deduction and a credit.
An $8 deduction would reduce one's tax bill by around $1600 to $4000, for instance.
"It is a CREDIT, not a deduction.
ReplyDeleteIf my tax bill for 2008 was $5k, I would get all of it back plus another $3k."
You are correct, but the way I see this is that the impact is almost the exact same thing as the plan the were originally discussing. The original plan was to have 8K and if your tax bill was not enough 8K in 2009 it would carry over to 2010 (to claim the credit). The way it is phrased now is that you get all the money in 2009 and then you start paying your entire tax bill in 2010. At the end of the day, its just a matter of timing of when you get the money.
This sums everything up perfectly:
ReplyDeleteMARION, Va. – Three of the NASCAR celebrities who endorsed the Sheridan Ridge resort development have returned their lots, and the other two have drastically reduced the price paid, county records show.
Quit-claim deeds recorded Dec. 30 indicate that drivers Denny Hamlin and Tony Stewart and crew chief Greg Zipadelli gave their lots back to Sheridan Ridge Private Reserve LLC, the North Carolina company formed in 2006 to develop a NASCAR-themed community in the region.
Deeds of correction were entered the same date for their property as well as lots owned by driver Elliott Sadler and FOX Sports personality and former crew chief Jeff Hammond, reducing the price of each lot from $323,205 to $50,000 – just enough to cover the lot release fee.
http://www.tricities.com/tri/news/local/article/nascar_stars_back_off_resort_project/20694/
To get $8K credit you have to put extra $25K in deductions. Is this fair when some privileged cast is getting substantial amount of money out of the blue? This will contribute to the overall inflation and bite every single taxpayer at the end.
ReplyDeletewell, this $8K credit goes to first time home buyers.
ReplyDeleteIf you live in DC, homes are $600K, which first home buyers cant afford, nor would $8K help anyway.
If you live in middle america where homes are affordable, someone like a first time buyer probably doesnt have a job. So its not going to help.
The way I look at things, only a minor minor few will be using the credit, so its nothing to really bitch about.
How are they going to track us as living "in the home for at least three years"? By our tax returns? Just curious.
ReplyDeleteMe and mine couldn't even afford a house if we wanted to, with or without this credit. So I think that Anon (who says that very few will be able to use the credit) is correct.
You can crank on the $8,000 credit all you want but it's still a credit.
ReplyDeleteIf you buy a house early in the year, the mortgage interest deduction plus this tax credit will give a five figure tax return. Easy. You will likely get a five figure return if you buy in November.
You can trash this anyway you want, Oh, it's taxpayer money, or oh, it's a deduction, ... Whatever folks ... but rest assured, when you file you are going to be extremely pleased with amount coming back.
"The way I look at things, only a minor minor few will be using the credit, so its nothing to really bitch about."
ReplyDeleteFunny ... this credit is modelled on the $5,000 first time homebuyers credit which the feds made available in 1997 for purchases made in the District of Columbia. (Rep. Norton's idea). Many credit this credit (no pun intended) with kicking off the night and day housing resurgence we've experienced here.
I'm not surprised that a BH would "want it all" though. It's never a matter of "how can I make it work?" ... it's always a matter of "what will land in my lap if I wait long enough?"
"And just like I always said that prices had to stop climbing so fast, I also believe they won't go down much (if any) in the midterm(i.e., prices 3 - 5 years from now will be no lower than they were at their height) and in the longterm (i.e., 5+ years) they'll be rising again at normal rates of appreciation."- Lance Nov 30 2006
ReplyDeleteAs always lance, you would rather people rush into a bad decision than exercise a little patience.
There is no good reason to rush in to buy in a still rapidly declining market.
"this credit is modelled on the $5,000 first time homebuyers credit which the feds made available in 1997 for purchases made in the District of Columbia."
ReplyDeleteYeah that would have been a sweet deal had I not been 17 years old and living in my parents house in Miami. Tell me Lance, what kind of credits did they have back in 1930 too?
If only I had taken advantage of the Beads for Manhatten Island deal, or had the first opportunity when the doors of Eden were opened and there was the land grab. I lost my ass on the beach front property next to Noah's place.
ReplyDelete"Yeah that would have been a sweet deal had I not been 17 years old and living in my parents house in Miami."
ReplyDeleteSo now you're a pissed off, overweight, out of shape 20-something living in suburban DC. Congratuations.
Does anyone know how how this credit works for two unmarried people buying a house?
ReplyDeleteIf I'm ineligible for this credit but buy a place with my girlfriend can she still get the credit? She has not owned a house and makes less than $75k. The 10% of the home's value restriction would not apply.
>"this credit is modelled on the $5,000 first time homebuyers credit which the feds made available in 1997 for purchases made in the District of Columbia."
ReplyDeleteYeah that would have been a sweet deal had I not been 17 years old and living in my parents house in Miami. Tell me Lance, what kind of credits did they have back in 1930 too?<
Ah, DC's 5,000 credit is still in effect.
Of course, there's no point to it anymore with the $8,000 federal tax credit. You can't get both credits.
Why didn't you look it up before flaming him?
"So now you're a pissed off, overweight, out of shape 20-something living in suburban DC. Congratuations."
ReplyDeleteHAHAHA! my my arent we bitter that our house dropped 20% this past year.
Don't confuse actuality with perceived 'bitterness'.
ReplyDelete"HAHAHA! my my arent we bitter that our house dropped 20% this past year."
ReplyDeleteI like how dissenting voices here are automatically labeled "Housing heads" who "pump real estate in DC" and who are all "losing our shirts" on our "exotic toxic mortgages."
OK, you're right. The only sane people in the world are single 30 year olds who sit in cubicles under flourescent lights every day, who sit in traffic every day, who rent a housing 'unit' in artificially homogonized suburban environments designed for families rather than for social dynamics.
Yep, you've got it all going on. {golf clap}
I have a question. I don't completly understand how this works. I am buying a house this year in the Atlanta area.
ReplyDeleteIf I usually get a $6,000 every year then next year I will max out at $8,000? In other words, the most return I could get is $8,000?
If this is the case I should up my exemptions. I presently claim 3 and thier are 6 in my household and I usually get about a $6,000 return ($6,600 for '08 taxes).
Am I thinking about this right? I should up my exemptions so I get more back now because the most I am going to be able to get back on my return for 2009 is $8,000 anyway?
Thanks for any advice or clarification.
Griz, when I did the $5,000 DC tax credit (DC has had a federal first time homebuyer credit for years) it was credit in addition to everything else.
ReplyDeleteMy tax return would have been at $5,500 after deductions/exemptions without the credit; the DC tax credit brought my refund to over 10K.
My understanding is the 8K credit works in similar fashion, but I'm not an accountant. However, I'm pretty sure you will see a five figure tax return.
"There is no good reason to rush in to buy in a still rapidly declining market."
ReplyDeleteRapidly declining? What's happening "out yonder" in exurbia is not what is happening everywhere around here. Prices have stablized here in DC, but they are most definitely not "rapidly declining". That sounds like wishful thining on your part.
Griz,
ReplyDeleteIt's a credit and not a deduction. You get it even if you have $0 income. (You just need to file a return.) And yes, you should adjust your exemptions now so that you don't have money withheld which will be coming back to you anyway at the end of the year.
"I like how dissenting voices here are automatically labeled "Housing heads" who "pump real estate in DC" and who are all "losing our shirts" on our "exotic toxic mortgages."
ReplyDeleteOK, you're right. The only sane people in the world are single 30 year olds who sit in cubicles under flourescent lights every day, who sit in traffic every day"
I like how your dissenting voice, a bitter moron who made a poor choice at buying at the top of the bubble, label everyone who didn't "someone that sits in cubicles under flourescent lights and sitting in traffic every day."
"Rapidly declining? What's happening "out yonder" in exurbia is not what is happening everywhere around here."
ReplyDeleteAre you talking about only the alphabet streets? Cause I work at NIH and want to live in Bethesda or Rockville...and they are dropping like a rock.
" like how your dissenting voice, a bitter moron who made a poor choice at buying at the top of the bubble"
ReplyDeleteWhat gives you any indication of when or even IF anyone bought anything other than a computer and access to the internet?
The fact that your a self-important suburban lemming douche is all the reason I need to come here and insult you.
"What gives you any indication of when or even IF anyone bought anything other than a computer and access to the internet?"
ReplyDeleteThe same one that makes you think people who didnt buy during the peak are fat, sit in a cubicle and drive in traffic to get to work. Jackass.
"What gives you any indication of when or even IF anyone bought anything other than a computer and access to the internet?
ReplyDeleteThe fact that your a self-important suburban lemming douche is all the reason I need to come here and insult you."
Because you get so upset when people mock people who bought at the top.
"Because you get so upset when people mock people who bought at the top."
ReplyDelete"upset"? LOL! No, I'm just a hate filled city-dude with an axe to grind against suburban douchebags and access more women in one day than you have in an entire year.
Clearly, I have issues. But you are clearly misinterpreting them based upon your own biases.
""upset"? LOL! No, I'm just a hate filled city-dude with an axe to grind against suburban douchebags and access more women in one day than you have in an entire year."
ReplyDeletequit your crying. Eventually your house will come back up to 2006 prices....it maybe in 40 years, but it will.
I used to own home in EUROPE in 2007 then sold the home and moved to USA.
ReplyDeleteI am thinking of buying home here in USA. Am I first time buyer?
The IRS site and other offical site just says you shouldn't own home in last 3 year, which is technicaly wrong in my case but I was owning house in EUROPE - different country.
Thans
"I used to own home in EUROPE in 2007 then sold the home and moved to USA.
ReplyDeleteI am thinking of buying home here in USA. Am I first time buyer?"
Im not sure, but my advice to you is move back. America is going down the toilet.
If you owned the home in another country, my guess is the IRS wouldn't know that you owned it, so you probably can get away with claiming the first-time homeowner credit.
ReplyDelete