Don’t forget the $7500 tax credit (or is it $8,000?)

First time homebuyers (considered buyers who have not owned a home for the past three years) may be eligible for a tax credit up to $7,500 when they purchase a home.   So you have very low interest rates, plentiful supply of homes to choose from, and attractive pricing.  Plus you can get a $7,500 tax credit on the following years taxes.  (Make sure you check with your accountant or tax advisor to see if this might apply to your situation.)

One of the disadvantages of the “credit” as it was originally proposed was that the amount needed to be re-paid with no interest over 15 years.  There might or might not be changes in that.  We should know something more definite as the economic stimulus legislation progresses.

The important thing here is to not be sitting on the sidelines when there are opportunities available.  I expect that some of the best opportunities will go to those who are ready to move forward.  Indianapolis real estate buyers, take note.

UPDATE FEB. 6, 2009.  It appears that there are upcoming changes.  First under current proposals, there will be a new $15,000 (or 10% of purchase price up to $150,00.)  Second, the tax credit would really be a tax credit and it would not have to be repaid as under the current tax credit.  The new credit would replace the old $7500 repayable credit.  These are proposals at this point and not final legisation.  Keep alert to the news about the stimulus package as it progresses through Congress.

UPDATE FEB. 12, 2009  It appears that as difference betweenHouse and Senate versions were ironed out, the $15,000 tax credit was removed.  It now appears that there will be a $8,000 tax credit for first time home buyers to replace the old $7,500 tax credit.

UPDATE FEB. 15, 2009  The new $8,000 tax credit will apply on homes closing 1/1/09 to 10/30/09.  On homes that closed in 2008 that were eligible before for the $7500 repayable tax credit, that is essentially unchanged.  There is a comparison matrix on realtor.org.  Click on the Stimulus update and then on the first time homebuyer credit.  From there you should be able to get the comparison matrix.  I will update this site soon with that information.  The bill is expected to be signed into law early in the week by President Obama.

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8 Responses to Don’t forget the $7500 tax credit (or is it $8,000?)

  1. donna says:

    i understand this is a loan which has to be paid back, so can a student be qualified to get the 7500 for school even though i don’t plan on purchasing a house anytime soon?

    • Dan Rosenberger says:

      Keep watching the news. I have heard that there might be some special tax treatment for students. However for the $7500 tax credit you do need to buy a home. Is it out of the question to buy a home? Sometimes that can be financially advantageous over living in a dormitory or renting off campus housing. But make sure you check with a tax professional to make sure that the tax credit would apply to your situation.

  2. mandy says:

    Do you think the deadline for the $8000 tax credit will be extended past July 2009?

    • Dan Rosenberger says:

      I will update this information. It looks like the $8000 tax credit for first time home buyers (which normally does not have to be repaid) will apply to homes which close between Jan. 1, 2009 and Nov. 30, 2009. It will be for 10% of the purchase price, so if a home costs less than $80,000 the tax credit would be less than $8,000. After this has been signed into law (probably on Tuesday) I am sure the IRS will have information about more details on their website. Be sure to check with your tax advisor on your specific situatin.

  3. Mike C. says:

    I’ve been reading all over about this new housing tax credit. Some people say the $7,500 tax credit (the one that has to be repaid over 15 years) will PHASED OUT and replaced by the new $8,000 tax credit (the one that does NOT have to be repaid). I bought my house in May of 2008 and just filed my taxes and accepted the $7,500 tax credit (knowing that I have to repay it). Will I be able to replace the $7,500 tax credit with the new $8,000 tax credit and not have to pay it back? Some are saying it’s only for people who buy homes in 2009. Some say it will replace the $7,500 tax credit ! Which is true? Where can I find some CONCRETE info. on this? I’m not complaining, I just want to know the real answer. Obviously the difference between repaying 7,500 and getting 8,000 for free is HUGE. If anybody has answers, I’d appreciate it. Thanks.

    • Dan Rosenberger says:

      My do I understand the confusion. This whole thing has been a real roller coaster. Proposals were made and people were treating them like they were already a fact. I will post some more details on this in the next few days. According to the National Association of REALTORS, on their site realtor.org, they have a comparison between the 2008 repayable tax credit for $7500 and the 2009 non-repayable tax credit of $8000. Basically anything in 2008 is unchanged (except for the expiration date). So if you bought in May of 2008, you have the $7500 repayable tax credit, assuming that you are a first time homebuyer and you didn’t use bond money to finance the home and probably some other fine print. The new $8000 tax credit applies to purchases that close Jan. 1, 2009 thru Nov. 30, 2009. The IRS will update their site after the bill is signed by President Obama, expected about Tuesday. I hope that helps.

  4. Mike C. says:

    argh. That just doesn’t seem right. So somebody who bought on December 30, 2008 has to repay the tax credit? That’s a TWO DAY difference from getting $8,000 for free and $7,500 that has to be paid back !!

    I wonder if there’s a chance that the repayment provision will be eliminated for those of us who bought in 2008? I have been reading and some sources say that’s the case.

    http://latimesblogs.latimes.com/laland/2009/02/an-8000-tax-cre.html?cid=148685171#comments

    Thank you for your help, Dan.

    • Dan Rosenberger says:

      Michael – anything is possible. There were proposals to make the $7500 non-repayable back to 4/9/08. But that was not in the bill that passed. Since real estate values are one of the driving factors in the current economic situation, you would think that bringing some stability to values would add more stability to the overall economy. Adding to demand for homes at affordable values should be part of that stability. So who knows what the future holds? One reason to make the $7500 non-repayable: People who have just gotten a home could be tempted to go out and blow the $7500 and then be more in debt (repaying the $7500 at $500 per year.) So when you get the credit you might do some things like add some cushion to your savings or pay down the balance of the mortgage some. But they do have to draw the line somewhere and so far they have chosen to draw that line on 1/1/09.

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