Q: I have heard about the new tax credit for first-time buyers and was wondering if I would be eligible under the new law that was just passed.
I purchased my home on March 17, 2008. That was about 20 days before the tax credit was announced.
This was my first house that I purchased and with the new law passed I’m curious to know if I now qualify for some sort of tax credit. Thanks.
A: The federal government offered a $7,500 tax credit for first-time buyers who purchased a home after April 8, 2008 through December 31, 2008. This tax credit functioned more like a zero interest loan, since you have to pay the tax credit back at a rate of $500 per year for 15 years.
If you move out of the home before the tax credit was fully repaid (also known as “recapture”), you would have to repay whatever portion of the tax credit remained with your taxes the following April 15th.
This tax credit could have been claimed by filling an amended 2008 return or when you file your 2009 tax return.
First-time home buyer who purchased a home at any time in 2009 will qualify for a tax credit of up to $8,000 that does not have to be repaid. Trade-up buyers, who lived in their home for 5 consecutive years over the past 8 years, who earn less than $125,000 as individuals (or up to $225,000 as couples), who buy a home that costs less than $800,000 and close between November 6, 2009 and June 30, 2010, will qualify for a tax credit of up to $6,500.
I’m sorry, but the tax credits are not retroactive before the start dates. Because you bought in March, 2008, you are not eligible for any of the home buyer tax credits that have been announced. People who purchased like you early last year were upset that they did not get the benefit of the tax credit. People who purchased last year are upset that they have to repay their tax credit back because if they had purchased this year, their tax credit would have been larger and they would not have had to repay the government.
Now with the new tax credit, existing homeowners are angry because they bought earlier this year and won’t get the $6500 tax break that will soon become available to existing home owners.
I guess the system is not perfect and cut off dates will always cause some to lose out on tax breaks.
Read more about the expansion of the home buyer tax credit