Some Notes on the $8,000 Tax Credit for Home Buyers

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

Here are some notes on this credit. If you’d like to read more, the most comprehensive source I’ve found, interestingly enough, is a site put together by the National Association of Home Builders.

• First-time buyers include people who have not owned a home in the last three years.
• There are income limits on this credit: full credit applies to those with modified adjusted gross income (MAGI) of $75,000 or less for single taxpayers and $150,000 or less for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
• This is a tax credit, rather than a deduction, and it’s “refundable” meaning that if you owed $10,000 in federal tax and received the full credit, then you’d only owe $2,000. If you owed only $2,000 in federal taxes (and you were receiving the full credit) then you’d get a check for $6,000 from the government.
• Generally, tax payers need to live in the home for at least three years or face recapture of the credit amount.