What is the difference between the $7,500 and $8,000 Tax Credit?
In an effort to decrease the inventory of homes for sale in the United States, Congress passed legislation in July 2008 to provide first-time home buyers a $7,500 tax credit (which is more like an incentive versus a credit) if you purchased a home between April 9th, 2008 and before January 1st, 2009. Then, to really make things interesting, in February 2009 they passed the American Recovery and Reinvestment Act which provided a true $8,000 credit for first-time home buyers who purchase a home between January 1st, 2009 and December 1st, 2009. That’s right… it says December 1st and not December 31st. There is no published information as to why the credit ended on the first of the month versus the end.
There is plenty of confusion as to who can use the credit, whether it has to be repaid, and how it’s collected. Here is chart that separates the key differences between the two credits.
Required to be Repaid: No Yes
Term of Repayment: N/A 15 years
Interest Rate: N/A 0
When Repayment Begins: N/A 2010
Purchase Date to Qualify: 01/01/09 – 12/01/09 04/09/08 – 01/01/09
Tax Return to Claim the Credit: 2008 or 2009 2008
Income Limits to Qualify: Single: Up to 95k Single: Up to 95k
Married: Up to $170k Married: Up to $170k
Maximum Credit Calculation: 10% of Sales Price 10% of Sales Price
Up to $8,000 Up to $7,500
Property Types that Quality: New, Resale, Construction, New, Resale, Construction,
Townhomes, Condos, Townhomes, Condos,
Manufactured, Houseboats, Manufactured, Houseboats,
Mobile Homes Mobile Homes
IRS Form Used for Credit: Form 5405 Form 5405
Financing Restrictions: None Mortgage Bonds Ineligible
While this chart lays out the key differences between the two different credits, there are other key points that need to be addressed. If you’re purchasing a newly constructed house from a home builder then the purchase date will be determined by the settlement date and having this occur before December 1st, 2009 will be key to eligibility for this tax credit. In order to receive the maximum tax credit then your income must be below $75,000 for individuals and $150,000 if married.