Economic Stimulus Bill 2009 – $8,000 Home Buyer Tax Credit

by Mike Holman

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As part of the recent economic stimulus bill of 2009 – an $8,000 home buyer tax credit was created.  This credit will apply to home buyers who buy a home this year.  Clearly this is an effort to try to keep up house values and given how much they have fallen, perhaps it is a good time to buy.  The important thing to note is that this credit is not a loan – it does not have to be paid back.

[edit July 8, 2010 - closing deadline extended for first time home buyers tax credit to Sept 30, 2010]

[edit Sept 20  $8,000 first time home buyer credit extended.]

Who is eligible for the $8,000 home buyer tax credit?

Any one who buys a home between January 1, 2009 and November 30, 2009 and meets the following conditions:

  • You must not have owned a house in the past 3 years.  This is the “first time” homeowner condition.
  • Your income must be less than $75,000 for singles or $150,000 for married couples.  Keep in mind that singles who make up to $95k and couples who make up to $170k can get a partial credit.

Is this credit a loan?

No, this credit does not have to be paid back.

Are there any strings attached?

Yup – you have to stay in the house for 3 years otherwise the credit has to be paid back.

What is a “first time home buyer”?

A first time home buyer is someone who hasn’t owned a house in the past 3 years or has never owned a house.  For couples – this applies to both spouses.  It is important that if you sold your last house in 2006 that you don’t close on the new house within 3 years of the previous selling date or you won’t get the credit.  For example if you sold your last house on June 1, 2006 then don’t close on a new house before June 1, 2009.

Is the tax credit $8,000 for everyone?

No, the actual credit is $8,000 or 10% of the house value – whichever is less.  For example if your house is worth $200,000 then you would get $8,000.  If the house is only worth $70,000 then you would only get 10% of $70k which is $7,000.

This is a refundable tax credit

The $8,000 credit means that anyone who is eligible for this credit can subtract $8,000 from the amount of tax owed to the IRS.  If you don’t owe $8,000 in taxes then you will get a refund for the difference.

For example if Bob owes $30,000 in taxes and is eligible for the $8,000 credit then he will deduct $8,000 from $30,000 and will owe only $22,000 in taxes.  Steven only owes $5,000 in taxes so if he qualifies for the credit then he will not pay any taxes and will get a refund of $3,000.

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{ 6 comments… read them below or add one }

1 Caroline

I love the fact that this is a Canadian blog and you guys write content that applies to people living in Canada. Since you’ve been writing about the U.S bailout (which is important as it will indirectly affect us as well), I was wondering if you could specify in your post whether it is Canadian or American that it applies to. For example this post I believe is Canadian since there was recently a first-time home buyers tax credit announced here, but I cannot be sure.
Thank you!

2 Four Pillars

Hi Caroline – good point about identifying whether a post is Canadian or American. Most of the stimulus posts I’ve been leading off with something about “President Obama” which should be a pretty good clue. Of course this one I didn’t – and I completely forgot about the Canadian home buyers tax credit (which would make a good post as well).

I’ll try to make it more clear in the future.

3 Kate

This article was very helpful to me, but I can’t believe that it was published and nobody noticed that you guys can’t add!

For example if Bob owes $30,000 in taxes and is eligible for the $8,000 credit then he will deduct $8,000 from $30,000 and will owe only $24,000 in taxes.
WRONG- He’ll owe $22,000 in taxes, grab a calculator next time! LOL

4 Four Pillars

Kate – Details, details! :)

Thanks for catching the bad math – I think something got lost in the currency conversion. :)

I sent an email to my editor to fix it.

5 Derek

Where do we apply for the credit ?

6 Willie Evans

Please send an application.

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