First Time Homebuyer Tax Credit Followup

As I noted on Friday, changes are afoot when it comes to the $7500 first time homebuyer tax credit. More specifically, there has been talk of converting this from a pseudo-credit that actually has to be paid back into a true credit. I just wanted to follow up on that article with a bit more information from this summary of the “American Economic Recovery and Reinvestment Plan” from the House Ways and Means Committee:

Refundable first-time home buyer credit. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7, 500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75, 000 ($150, 000 in the case of a joint return). The bill would eliminate the repayment obligation for taxpayers that purchase homes after January 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. This proposal is estimated to cost $2.562 billion over 10 years.”

As frustrating and unfair as this change will seem to people that took advantage of the credit in 2008, the limitation of this change to 2009 actually makes sense. After all, the goal is to get people to go out and buy houses, which means that people that have already taken the plunge aren’t the target audience.

Thanks to Ross for digging this up!

109 Responses to “First Time Homebuyer Tax Credit Followup”

  1. Anonymous

    Absolutley unfair! being someone who had bought my first home, it was overwhelming, but necessary because i was tired of throwing my money away by renting. When i heard about this credit, it was like a breath of fresh air. Knowing i had to pay it back was something that i was aware of and accepted, but couldn’t help but keep in the back of my mind how nice it would be not to have to pay it back. Then what do you know, i chose to buy my home at the most appropriate time for me, and four months later, the dream, ideal situation, for myself and im sure many others falls into place. My first home i purchased is more than i could have hoped for, but then again, if i would have just waited, i could have let my dream house slip through my fingers and i wouldn’t have to pay back the money that is making my first house, my home.

  2. Anonymous

    This credit is not designed to be fair. It is designed to stimulate purchases…a $7500 loan wasn’t enough to get significant traction, so they upped the ante to an $8000 credit. Seems simple enough to me.

    As for the previous poster, I sympathize with your loss and would guess that you are thankful that unemployment benefits have been extended for a year. Imagine if you had been one of the unlucky folks who lost their job during a previous recession, you would have been capped at a measly 6 months.

    See, there is always a bright side…

  3. Anonymous

    So if you were wealthy and lucky enough to escape the economic downturn of 2009 and somehow keep your job and be able to buy a house, you’re also lucky enough to get a FREE $8,000 GIFT from the government to reward such wealth and security! Now, as for hardworking people like my husband and I who finally took the plunge of buying a house in ’08, we not only have to repay our $7,500, but we were also laid off in 2009. Hooray for the United States!!!

  4. Anonymous

    I just amended my 2008 income tax return for a home I bought July 18, 2008. When I did my 2008 income tax I did not know about this credit. I had my taxes done at a free tax preparation service and they obviousely did not know to tell me either. Later I researched this for myself. I am a teacher for a non-profit for the poor and under-priviledged in our area. I do not make much more than an average salary. I decided to take the credit even though I have to pay it back to pay off two small credit cards and bank the rest. If we were not responsible to repay this credit I might be able to use more of this money for home/energy improvements.

  5. Anonymous

    I agree its not fair i took the $7500 and need to pay it back. If I would of known I could of waited a few months and not paid back I would off. I think EVERYONE should stop buying houses if we still need to pay back the $7500. If we all quit buying houses the government sooner or later will be force to just give us a house. a hand out of sorts. Hell the auto industery and banks are getting them why not us the people. EVERYONE quit buying let see what the government will do than.

  6. Anonymous


    Sean, you’re taking the analogy in the wrong direction. You only get the government handout when you make a purchase. What’s happening is much closer to this: the TV costs $307,500 and then 30 days later it costs $300,000.

    If that happened, no one would even blink. You couldn’t attract journalists to that story even with free food. Housing is just a more emotional issue in general.

  7. Anonymous


    Well, I’d still be frustrated – no way around that. On the other hand, it would still be past the 30 day price match guarantee nearly every store has these days; not much I could do other than chalk it up to the reality of the retail environment. I suppose you could return it and buy another as some folks do, but that’s not the most ethical way around things. Nor can most of us return our houses…

    Ultimately, my point is still simply that anyone who got a credit (be it the $7500 or $8000) knowingly entered into an agreement at the time the bought their house. Nobody was forced to take the money. You win some, you lose some, and you have the right to be frustrated – but none of that makes it the government’s job to change the deal on an old program to make people feel better.

  8. Anonymous

    Seriously people, you knew the deal when you signed up for the money. I’m getting tired of hearing all the talk about how Congress needs to change it so all the credits are equal and don’t require repayment.

    Would I be frustrated if I had to pay money back while others didn’t? Well sure, just as I’d be frustrated if I bought a big new TV for $1200 and 31 days later the same store had it for $750. But that’s the reality – you knowingly entered into an agreement and took advantage of money that was available when you bought a house. So stop complaining – please!

  9. Anonymous

    I love the fact that I closed on my home on Dec. 15, 2008 and took advantage of the $7500 credit and two weeks later I could have gotten $8000 and not have to pay it back. Congress needs to revisit this and either make everyone pay it back or no one pay it back.

  10. Anonymous

    I went out with the 7500 credit and bought my first house by myself which I never thought possible. It is not fair that the people who waited til the next year do not have to pay their credit back. Time should not have mattered, and those of us struggling but paying our new house payment will be hurt by having to pay this extra. The same rules should apply to all of the homebuyer credits. We all pay it back or we all do not pay it back. IT is unfair for one group to absorb the payments.

  11. Anonymous

    That’d be really nice if we got ours in 5… husband had a motorcycle wreck couple of months ago when someone pulled out in front of him and they just did surgery yesterday so it would be nice to get our 8,000 so we can get our new floors in…we have to get those in before we can move in just because we dont’ want to deal with moving furniture around….How long has it taken everyone else to get there 8,000?

  12. Anonymous

    Yea Courtney, your realtor is full of crap. It will take at LEAST 4 weeks since in order to get it NOW instead of on your 2009 return, you have to file an amended 1040x for your 2008 return. Those take anywhere from 8-12 weeks to process. I lucked out and got mine in 5.

  13. Anonymous

    We just bought a house we closed last Friday. But we arn’t using it has a crutch either. We have the money to make our payments we are using the 8,000 for new appiances and updating the house 🙂 HOWEVER I do see where some people are going to abuse this which is very sad :-(….Also we sign the papers on Monday for the 8,000 our realtor said we could get it in 7 to 10 days I THINK SHES full of crap and doesn’t know what shes talking about I’m thinking its more like 6 to 22 weeks correct??

  14. Anonymous

    I too agree that this is unfair to those of us who took the chance in a bad economy without “perks”. I know a lot of people who ONLY bought a house because of “free $8,000”. Some of which can’t even afford them to begin with. Yet those who did whatever they could, worked extra hours, did side jobs, whatever it took to purchase a home in a bad economy and yet we have to pay back the money. It’s not far at all!

  15. Anonymous

    Still trying to find out where this July 1st, 2009 “deadline” came from. The deadline for purchasing to get the $8,000 credit is December, 2009. And the deadline to file an amended return is 3 years. So essentially someone who buys a home in August, can amend their 2008 return and get the money quicker, right? Where are we getting this “must buy house by July 1st” thing from?

  16. Anonymous

    I heard on the news that come July 1st 2009 that $8000 tax credit can be used towards your down payment. Is this true? Our lender told us that they were trying to get this passed.

  17. Anonymous

    Heh. “Government spending” is enough for me; in any given instance the odds are pretty good that it’ll have a detrimental effect on someone (not necessarily just the people whose money is being spent).

    (For example, California is offering an additional $10,000 to homebuyers, but only to homebuyers who buy newly constructed homes. You don’t have to be the taxpayer to get affected by that one.)

  18. Anonymous

    Trav, we actually agree a lot. I think house prices must come down further, back to the long-term inflation trend-line, which is about 15%-20% further south. Therefore, no grants or credits at all would have been better.

    Regarding tax dollars, broadly, all gov. spending comes from tax dollars, current, future, and implicit, where I include the so-called inflation tax, which is a result of deficits (averaged over long time periods; and since treasuries are like money in effect, etc. etc.). So since this is government spending, we ought to say how we think it should be spent.

    Broader language would be perhaps “your and my money being spent”. Maybe we need to start saying something like “government spending is spending your and my money” or something like that. Can you think of a better phrase?

  19. Anonymous

    HB, there’s nothing wrong with thinking that these credits “should” be made more equal across different years. My personal opinion is that these credits “should” never have been established and “should” be halted immediately.

    My point was simply that if the govt offers me a $7500 loan to buy a house, and I accept that loan, then both sides implicitly agree it’s fair. That isn’t altered just because a different deal happens between other people at other times. Different people have different priorities; if they didn’t, markets wouldn’t function.

    By the way, we also disagree on the relationship between taxation and representative democracy, but what’s important is that this is *not* a decision about how to handle your and my tax dollars. These grants aren’t paid with tax proceeds. They’re paid with money the U.S. doesn’t have and isn’t borrowing — i.e., they’re inflating the economy by creating dollars. This reduces the buying power of all existing dollars. Yes, it’s still technically a “tax”, a tax on each dollar you currently hold, but it’s not subject to any kind of predictable tax code or any tax policy you might be referring to.

  20. Anonymous

    Trav, good start, but think it through further.

    We are talking about public policy, literally how to handle your and my tax dollars, so as taxpayers we have a right to say what we think should be done, and how and why, etc.

    I say that if my tax dollars support a $8000 grant to first time home buyers during 2009, that I also think the “credit” to first time home buyers in 2008 should be at least a partial grant, in order to even the playing field. A similar rule I think should be in place is for the 2009 grant to be stepped down over time, say $6000 in 2010, $4000 in 2011, $2000 in 2012, so as to reduce economic distortions.

    I’d welcome specific, well-reasoned alternatives.

  21. Anonymous

    These complaints about fairness are as bad as the complaints from the people who waited in line to buy an iphone at $399 before Apple cut the price to $299.

    There’s nothing unfair about offering homebuyers a deal and then fulfilling the deal with the homebuyers who agree to it. If you entered into that transaction willingly, then it was a good deal for you, a net gain, right? Did your gain somehow become a loss just because the govt made a different deal with someone else?

  22. Anonymous

    Take the credit even if you have to pay it back.

    Here’s why:

    If you simply put the money in a savings account, money market, or part of it in a CD, etc., you can earn some interest.

    Alternatively, you can pay off credit card debt (and then DO NOT RUN UP YOUR CREDIT CARD AGAIN AFTER).

    Then you have a lower interest rate, and an easy repayment (but not a flexible one) of only $500/year.

    This can save a lot of interest costs.

    STill, the most fair would be for part or all of this credit to be a true real credit (with only 1/2 or even $0 owed as repayment).

  23. Anonymous

    Fair would be to have at least a partial forgiveness of the $7500 credit repayment for year 2008 home purchases also.

    For instance, to reduce the repayment requirement for 2008 purchases to 1/2 ($250 a year for 15 years, instead of $500/year).

    Any news on the final outcome. I haven’t been able to find this easily at all, after several searches.

  24. Anonymous

    I am 25, and just purchased my first home…on December 18, 2008. I now have to repay my $6000 tax credit — if I had known I would miss the cutoff for the new “improved” non-repayed credit, I would have waited two weeks. Thanks!

  25. Anonymous

    A previous poster mentioned (then edited out) that the purpose of the tax credit is not to make it more inviting for people who can’t afford it. Good move editing that out!

    Arguably this credit *is* to lure in people who can’t afford it. We’ve noted here already that some folks will use an $8000 credit toward a down payment and thus actually buy an extra $40,000 worth of house. So they’ll go deeper into debt. This tax credit *increases* consumer debt, even if hypothetical well-meaning legislators don’t know it.

  26. Anonymous

    Previous poster…only your son’s income will count.

    As for your credit you may want to look a bit further. The credit begins to phase out for incomes over $150,000 per year but does not disappear. So if your income exceeds $150,000 you may still be eligible for a reduced credit.

  27. Anonymous

    I have a question: My son is a first time homebuyer. I will be cosigning on that loan. Would we have to count both of our incomes for the 2009 tax credit or just his? My husband and I plan to purchase a home this year also, however we will not be eligible for a tax credit because my husband makes too much money.

  28. Anonymous


    The definition of 1st time buyer that is being used is one that has not owned a home in the previous three year period. So you mentioned that is has been two years since you owned and if you will hit that three year point at anytime before 12-1-09 then you are eligible. By the way the credit is $8000 now.

  29. Anonymous

    Don’t you think the target audience should be all home buyers, not just first time. I sold my house and moved for a job. It took me two years to find an affordable house in my new town. I pay my taxes and sure could use an extra $7500 to cover my costs of moving! Does anyone know if you could be considered first time if you moved for a job?

  30. Anonymous

    I am sure that you can file an amended return to take advantage of the change when it happens. Stop in to an H and R Block or some tax place but wait about a month for the IRS to issue the guidance on how to claim the new credit and just file a new 2008 return. You will get another $500 and not have to pay it back.

  31. Anonymous

    I just closed on my home on Jan. 16 2009. We just did our taxes on Feb. 8th and chose to receive the $7,500 refundable tax credit on our 2008 return. We have now received that credit. Does this mean I am stuck with $500 less and the refundable credit or would I be eligible for the $8000 non refundable credit. Anyone know the answer to this?

  32. Anonymous

    Here is something I haven’t seen anyone write about but thought I would pass along. I closed on my home in May of 2009 and will be eligible for the $7500 credit. I am going to stuff mine away into an IRA account to bump the amount. Contributing to an IRA (SEP-IRA or Traditional) account can increase your refund by up to $2250 if you use IRAs of both spouses.


  33. Anonymous

    It is not refundable but it allows you to get back at least as much as your total tax liability plus what you over paid. So to compute what you would get in year one under the new credit take your total tax liability and add your overpayment and that is what you would get back. So if your total tax liability is only $3750 or less than the new credit doesn’t do anything for you as you can’t get back more than you owe and the current credit is $7500. But if it is like $6000 or $7000 than you get a big refund two years in a row.

  34. Anonymous

    “but the following quote is leading me to believe that this is a NON-refundable credit unlike the previous $7500 credit initiated last summer.”

    that is what I have read in numerous postings. The “NEW” credit is NOT refundable. The “OLD” one was. I qualified for the old credit and i filed my return earlier this week. I am getting nearly a $9000 refund whereas I would have only received a $1500 refund w/o the credit. It’s my money to begin with so…..yippee for me.

  35. Anonymous

    Previous poster asking about taking the credit before closing. You could probably get away with it but what if something goes wrong and you don’t close as planned. Then you just committed tax fraud. Tread carefully…

  36. Anonymous

    As best I can tell the $15,000 tax credit will reimburse you for the total tax obligation that you owe and can be used for two years. For example…you owe $7500 in tax and your withholdings are $8500. Normal refund would be $1000. Under this plan you will get the entire $7500 credited back to you for a total refund of $8500. This can be done over two years up to the total $15,000 tax credit. Or if you are fortunate enough to make enough money to owe $15,000 in federal tax then you can take it all in one year (2008 or 2009).

  37. Anonymous

    Can anyone show me proof that this tax credit can reduce the tax owed below zero? That if I am entitled to a refund, I will get that plus the credit?

    I read through the legislation and I find this stuff VERY difficult to comprehend, but the following quote is leading me to believe that this is a NON-refundable credit unlike the previous $7500 credit initiated last summer.

    4 TAX.—In the case of a taxable year to which section
    5 26(a)(2) does not apply, the credit allowed under
    6 subsection (a) for any taxable year shall not exceed
    7 the excess of—
    8 ‘‘(A) the sum of the regular tax liability
    9 (as defined in section 26(b)) plus the tax
    imposed by section 55, over
    11 ‘‘(B) the sum of the credits allowable
    12 under this subpart (other than this section) for
    13 the taxable year.

    Can anyone translate this?!?!?!

  38. Anonymous

    I closed on my home Jan 17, 2008 and our home value has decreased by 150, 000 thousand dollors. I feel the people who lost value on their homes should be offered the tax credit to afford to stay in their homes. I was looking forward to the credit so we could pay down credit card debt and offord our loan. It aslo would have cleared up our choice to stay in a home that has lost soooo much value. The value loss was not due to our actions it was due to the Goverment failing to regulate our lending industry. All first time home buyers should get the credit who bought during the peak and lost value. It’s a joke to offer the credit during a time when loans were impossible to get and now their offering a credit to people who are going to purchase a home at a much more resonable price and they get the tax credit, WOW. What about the people who lost so much value and are first time buyer who bought in the peak? It is what it is and it will be!

  39. Anonymous

    I am reposting this, because I did not get an answer. Can you claim the credit if you have not yet settled on the home? I am settling Feb. 25, and would like to have the credit for settlement. Isn’t that the purpose of it? But I do not want to get into trouble for claiming it, when I do not yet own the home.

  40. Anonymous

    They should make this credit retroactive at least to the April 9th date, and here’s why…..the original legislation was from April 9th of 2008 to July 1st of 2009. That means that the time period from January 1st of 2009 until July of 2009 was covered under the original credit which had to be paid back. Now, if they say that those people who buy a house after January 2009 are the only ones who don’t have to pay it back, that’s not really fair to those who qualified under the original plan, which extended into the same time period. Get it? Now if say, they said anybody who buys AFTER July 1st of 2009 is subject to the new rules and new game, that would make more sense…but they’re going into the same time period as the old plan, and changing the rules only for some of the people, and that’s not right. I have written my Senator and my Representative about this, and I would encourage you to do the same.

  41. Anonymous

    I would say yes…the 5% downpayment provision applies all closings after the bill is actually enacted. So if the bill has passed by the time you close you would be subject to the 5% provision.

  42. Anonymous

    Help! I am closing Feb. 18th with an FHA loan. My downpayment is 3.5%. Should I up it to 5% to qualify? Forgot my civics lessons. When will the 5% downpayment provision kick in?

  43. Anonymous

    Previous poster….the difference is this tax credit was a targeted stimulus and the bill was not passed until July 30th of 2008. It was made retroactive over three months, hence the April date. This was pretty generous. The reason they make these bills retroactive is to avoid locking the market up as buyers wait for all of the rumors that have been spread regarding potential changes to tax law. Any new changes to the bill appear to only be retroactive to January 1 so less than 1.5 months. This is an effort at stimulating the purchase of new homes…not lining the pockets of random Americans. Go buy a new car…they are offering a new credit for that!

  44. Anonymous

    I think those of us who purchased a home in early 2008 are getting shafted. I closed on March 31- and now I am going to miss out on 7500/15000 (whatever it ends up being for the 2008 folks).

    Once they decided to make it retroactive to 2008, they should have done it all the way back to January 1. What is the sense of April 9th? Now we get to see the section on our 2008 tax return for the First Time Homebuyers credit, but we get nothing. Never seen or heard of a tax credit that only applies towards purchases for a certain part of the year.

    Want a tax break? Put solar panels on your house in January, have twins in March, expand your home office in July, take a business trip to Calcutta in November. It won’t matter when, as long as it was 2008. Oh, you bought a house for the 1st time? Hope it was after April 9th.

    Write your congressman, maybe it’ll help. I wrote my representative and both senators, and the president. I wrote letters to the editors of all the newspapers around here. If you are getting the shaft, you should do the same.

  45. Anonymous

    It is refundable…my above post reflects revisions to the current credit. Everything else remains the same including the ability to claim on 2008 return. Now let’s just hope it makes it’s way unchanged through the conference commitee and onto the president’s desk. (You can imagine how lucky I feel having closed on January 2nd…finger’s crossed here!!!)

  46. Anonymous

    I can not find information on whether this new proposed credit of 15k is a REFUNDABLE credit like the 7500k or a non-refundable credit. Can anyone clarify?


  47. Anonymous

    Well, if they don’t at least waive the payback requirement for the $7500 tax credit that previously existed, that would be a severe blow to those who bought last year. We closed on 8/7/08, and if we had waited,we may not have been able to even get the financing. Also, we moved from Seattle to Spokane, so we could get a house we could afford, but so far only my wife has found work in Spokane. The old rules included houses purchased into June of 09 anyway, I believe, so they should make it retroactive to include those who just bought houses. It might help them be able to keep those houses!

  48. Anonymous

    BIG QUESTION!!! Can you claim the credit if you have not yet settled on the home? I am settling Feb. 25, and would like to have the credit for settlement. Isn’t that the purpose of it? But I do not want to get into trouble for claiming it, when I do not yet own the home. HELP!

  49. Anonymous

    As for the 5% down part…FHA requires 3.5% now so it is only an extra 1.5% to put down to get the credit. As for the previous poster who mentioned borrowing money from relatives. You are correct in your thoughts however you can get around that if your relatives will let you keep the funds in an account for approx. 60 days before purchase. This in effect “seasons” the funds and makes them your’s for use on a conventional down payment. Just a thought.

    I agree with the previous poster that we should be able to file in 2008 but if not you could always request the $7500 credit now and then amend your 2008 return next year to not take the credit and then file for the credit in 2009. Of course you would need to pay back the 2008 credit at the time you amend but you could do so under the assumption that shortly thereafter you would be recieving the $15,000. Just a way to get at least a few bucks up front if they decide not to let you file the new credit for 2008.
    Please consult a tax professional before taking any of my advice!!!lol

  50. Anonymous

    ^ Yup, and here’s the big kicker…

    I’m young and will be using this credit to buy my first house as I mentioned above – can easily make monthly payments but don’t have tons saved.

    Anyway, with FHA you can have as much of the downpayment money as you want be from gifts from family, etc. as long as you have enough to put down at least 3.5% of the purchase price as your DP.

    But with traditional mortgages, which start at 5% DP, that first 5% has to be your OWN money. So, in my case for example, I can’t borrow $4K from relatives for a month until I get the tax credit money from filing my taxes and pay them back. So even if the credit makes it “my” money I can’t use it for a traditional mortgage that has a 0.5% lower interest rate. Frustrating!

  51. Anonymous

    Steve –

    Pretty sure the bill says you can file on your 2008 return even if you purchase in 2009.

    As far as the down payment part, that is probably the dumbest thing I’ve ever heard. They want people to buy houses so they dangle the credit out there like a carrot. However, the people who probably need the credit the most don’t have 5% to put down on a house. This will probably not accomplish anything, as it is missing the target audience.

  52. Anonymous

    ^ Thanks for digging that up.

    Answers most questions EXCEPT whether we can file retroactive on our 2008 taxes to get the money back ASAP. Wish they would have put something about that in there.

    Then again, this is amending the current bill so unless they have struck those sections/paragraphs from this modified version it seems to me that the retro clause should still apply… no?

  53. Anonymous

    The tax credit included in the Senate version that was passed allows for $15,000 for any home buyer between
    1-1 and 12-31 this year. It is a true credit with no repayment requirement. It appears that they are also requiring a 5% downpayment to get the credit but that this rule does not apply to purchases made this year but before the final signing date of the bill. Here is what I found on in in the Senate congressional record.

    Subtitle C—First-Time Homebuyer Credit
    (a) EXTENSION OF CREDIT.—Subsection (i) of
    section 36 (as redesignated by subsection (d))
    is amended by striking ‘‘July 1, 2009’’ and inserting
    ‘‘January 1, 2010’’.
    (1) IN GENERAL.—Subsection (a) of section
    36 is amended by striking ‘‘an individual who
    is a first-time homebuyer of a principal residence’’
    and inserting ‘‘an individual who purchases
    a principal residence’’.
    (A) Section 36(b)(1)(A) is amended by inserting
    ‘‘with respect to any taxpayer for
    any taxable year’’ after ‘‘subsection (a)’’.
    (B) Section 36(c) is amended by striking
    paragraph (1) and by redesignating paragraphs
    (2) through (5) as paragraphs (1)
    through (4), respectively.
    (C) The heading of section 36 (and the item
    relating to such section in the table of sections
    for subpart C of part IV of subchapter
    A of chapter 1) are amended by striking ‘‘firsttime
    homebuyer’’ and inserting ‘‘homebuyer’’.
    (1) IN GENERAL.—Paragraph (4) of section
    36(f) is amended by adding at the end the following
    new subparagraph:
    IN 2009.—In the case of any credit allowed
    with respect to the purchase of a principal
    residence after December 31, 2008—
    ‘‘(i) paragraph (1) shall not apply, and
    ‘‘(ii) paragraph (2) shall apply only if the
    disposition or cessation described in paragraph
    (2) with respect to such residence occurs
    during the 36-month period beginning
    on the date of the purchase of such residence
    by the taxpayer.’’.
    (2) CONFORMING AMENDMENT.—Subsection
    (g) of section 36 is amended by striking ‘‘subsection
    (c)’’ and inserting ‘‘subsections (c)
    and (f)(4)(D)’’.
    36 is amended by redesignating subsection
    (h) as subsection (i) and by inserting after
    subsection (g) the following new subsection:
    credit shall be allowed under subsection (a)
    to any taxpayer with respect to the purchase
    of any residence unless such taxpayer makes
    a downpayment of not less 5 percent of the
    purchase price of such residence. For purposes
    of the preceding sentence, an amount
    shall not be treated as a downpayment if
    such amount is repayable by the taxpayer to
    any other person.’’.
    (1) IN GENERAL.—Except as provided in
    paragraph (2), the amendments made by this
    section shall apply to residences purchased
    after December 31, 2008.
    amendment made by subsection (d) shall
    apply to residences purchased after the date
    of the enactment of this Act.

  54. Anonymous

    Just adding myself to the list of people curious as to how this works if we close in ’09.

    I’m 23 and seriously considering buying a house right now as a result of the credit. I have a good job and make plenty to be able to afford all the monthly payments for a decent-sized ($120-140K where I live) 3 bed/2 bath house. All I’m lacking in is the downpayment money.

    Right now the plan is to borrow whatever extra I don’t have (probably a few thousand) from relatives and then use the $7.5K credit money to pay them back quickly. I can do this with FHA for sure and possibly with a more traditional loan depending on the bank.

    However, I need to get the money back reasonably soon to pay the money back so I plan to file retroactive on my ’08 taxes (assuming I close before April 5th or so and I have time to get them filed) to get the credit money with my refund ASAP. But like many others, I am completely torn if that means I set myself up to be ineligible for the truly free money once these bills are passed.

    Long story short, I’m in the same boat as a lot of you and want to follow this here post closely for new news!

  55. Anonymous

    My husband and I are building a home right now. We will close in late March or early April. Does anyone know if I can claim the credit on my taxes and file now?? Or do I have to wait until we actually close?

  56. Anonymous

    I also bought at the end of 2008 and will probably have to repay the credit. I have learned my lesson though. Next time, I’ll wait to take advantage of any government plan until near the end of it to see if they change it again. Based on past circumstances, I would wait until the 2009 credit gets closer to expiring. They may just change it again, maybe from $7,500 to $15,000 or more. This one bill probably isn’t going to just fix everything anyway.

  57. Anonymous

    I am having a hard time getting clarification on the new provisions put into the new stimulus. I bought a house in September of 2008 so I know I am eligible for the $7500 credit, but on the new stimulus it says payback will be eliminated. What I can’t figure out is if this is just for people who purchased there homes in 2009? I have heard many different interpretations. Would I still have to pay mine back? If so, I would not think this would be the way the governement should do it. The bill was passed for April 9, 2008- June 30,2009. If they eliminate 2009 payback, 2008 should be as well. Can someone please help me understand this more.

  58. Anonymous

    Chris…same boat here as with many others we are waiting for the answer. I am guessing as the law has not been officially passed that the IRS has not issued guidance so it will be impossible to get the answer until this whole thing gets approved.

  59. Anonymous

    I think this question was posted, but I don’t know if it was answered. I am scheduled to close on our first house feb. 18th, the bill says we can treat it as if purchased on 12-31-08. If we close in Feb. and file the credit on our 08 return, does that mean we will be part of the repayment plan, or part of the new amendment (non-repayment) to the bill?

  60. Anonymous

    I am going to take the loan, bought the home and the money will go back into the home to improve its value, new windows first.
    I bought my home April 19th 2008 and yes I am upset
    that in 2009 first time homebuyers will not have to pay it back, however rules and regulations change as often as a baby’s diapers so don’t get too upset.
    Now you all will think I am nuts because I bought my first home at 61 but despite all I see here my main goal is still to fix up this home and retire in it someday. Good Luck to all.

  61. Anonymous

    I qualify for the interest free 7500 loan and am going to take it (because, hell it’s free money). Even though I put 20% down on my home and have no need for the money I figure it will be great to use for my Roth IRA contribution because it’s free money now and will be free when I take it out years from now. Thank you Uncle Sam.

  62. Anonymous

    I am 21yrs old and a first home buyer. I am waiting to close on a house that is in the process of being built, with an est. finish date of April. I have been following the subject and have a question. Say I file for the credit on this years return amending the date to 12-31-08 so I receive the money now as opposed to a year from now. However if I opt to do this will it result in repayable credit if this bill is amended as the date will be recorded as 12-31-08 instead of as an 09 purchase. Will I have to wait and file it on next years form to receive the credit? Seems like if they want the money to aid in the purchase of the house their would be a loophole to get the money on this years return. or maybe that’s what their going for? thoughts?

  63. Anonymous

    This entire argument seems completely ridiculous to me. Just be thankful the benefit is there, whether you have to pay it back or not. At least you fall within the time frame. I purchased my home on March 27, 2008 and don’t fall under the arbitrary April 9, 2008. It seem that if they did make any changes, make the start date retroactive back to Jan 1 2008 through 2009.

  64. Anonymous

    I am in the same situation, I closed on April 30, 2008 and will have to repay the credit because I bought last year.

    I have written to Senators Kennedy and Kerry from Massachusetts. I hope the revisions to the bill will include those who bought homes in 2008.

  65. Anonymous

    Imagine how I feel! I do qualify for the tax credit b/c I closed on my home on May 1st, so I AM eligible for the credit, but according to what is in the currently proposed stimulus package, I will STILL have to repay MY tax credit, BUT those that qualify for the EXACT SAME tax credit, but who closed AFTER January 1st (instead of the original April 9th date) WON’T have to repay it. Now how fair is THAT?

    Why should I have to repay mine but they dont have to repay theirs. It’s the same tax credit!

    Either everyone who gets the credit should have to repay it, or no one who gets it should have to repay it. It make no sense, and I emailed Sen Isakson of GA, who sponsored the new Bill (Senate Bill S.253) and told him so. I encourage everyone do so as well. Let your State Senator and Congress person know as well.

  66. Anonymous

    My husband and I bought our first house in August of 2008, and are of course very interested to see what will happen with the stimulus bill, and whether the “true credit” will be retroactive to those of us who bought in 2008. I wrote my senators and noted to them that, if they are interested in stimulating the economy, then they should make the credit retroactive, encouraging us to actually use that money toward home improvements rather than putting it into a high-yield savings account.
    While I know that fairness doesn’t count for much in government, it would be quite a slap in the face if the House and Senate decide that those of us who bought in 2008 don’t deserve the same credit as those who are purchasing in 2009. After all, we’re the ones that have been taking a chance and supporting the real estate market over the last year.

  67. Anonymous

    Here is the question I face…My wife and I closed on January 2nd. If we claim the credit on our 2008 taxes as is allowed currently will we be subject to repayment even though our settlement date is after January 1.

  68. Anonymous

    This may provide an answer about weather if you bought a house in 2008 under the new bill the repayment would be removed. Looks like that the answer is no; as taken from the language in the House and Senate versions of the stimulus bill. Taken from
    Both the Senate and the House versions of the new act remove the requirement that buyers repay the credit. The Senate bill applies retroactively to any purchase completed between January 1, 2009 and the end of August. The House version is also retroactive to the start of the year, and expires at the end of June. As long as buyers don’t sell for at least 36 months, they keep the money.

  69. Anonymous

    I totally agree, I am biased as well, but just because I closed earlier does not mean I should be excluded from the benefit of not having to repay. Regardless, I am taking the credit anyways. It does seem like the Government does not feel that many people are going to take advantage if it, so they are amending it.

    If the cut off is July 2009 for no-repayment, that is a pretty short time frame for someone to decide to buy a house and get everything settled, most likely that process started in 2008 anyways.

    One of item that is unclear is that I have seen some information that says when you take the Homebuyer Credit, you cannot itemize your deductions. Anyone know if I can still itemize while claiming the credit?

    – Ben

  70. Anonymous

    Yeah that is prob more likely, but it doesn’t seem fair if that occurs. If the timeframe is April 9, 2008 through July 1, 2009, then all buyers who settled within that timeframe should receive the same benefits. I mean take for example someone who settled on say Jan 10, 2009. He or she would have been under the impression that they would be able to take the credit and have to pay it back (same as 2008 buyers), but then when the change is made they dont have to pay back while 2008 buyers do? Doesnt add up. Obviously, I am biased, but still, the same rules should apply to everyone within the stated timeframe.

  71. Anonymous

    I wish I had some more info on it, but I just find conflicting reports. I have written to both of my Senators (I am from Massachusetts), not sure what that will do, but it will not hurt.

    I can see them leaving it as is for the 2008 purchases though, seems like they want to increase the incentive for new purchases, not for those made in the past.

    – Ben

  72. Anonymous

    Agreed, Ben. I settled on May 9, 2008 and I am hoping that if this new proposal passes in the Senate, that I can get the $7,500 and not have to repay it. I would just feel a lot better if I had something ‘concrete’ that stated this. I am sure more will come out in the next week or so when the Senate comes to a decision. But any info now would be much appreciated.

  73. Anonymous


    I agree with Scott, there appears to be some conflicting reports as to if homebuyers who bought their home in 2008 are eligible for the newly revised non-repayment of the $7,500 tax credit.

    I closed on my house on April 30, 2008. Will I be eligible under the revision? I would find it hard to believe that they would in essence “penalize” those who bought in 2008.


  74. Anonymous

    As of now, the date they set for it to expire is July 1, 2009. So you would need to settle on the home by then to qualify. Some are pushing for it to be extended to the end of 2009, which means if you settled on the home (you dont need to have moved in) then you would qualify, but that’s only if they move the date from July 1 to Dec 31, 2009.

  75. Anonymous

    We want to buy an apartment that will be ready on January 22, 2010. We signed a Purchace Obligation and paid 10% of the apartment value. The contract is still in attorney review, so we have couple of days to make some changes.
    Does that mean that we will not benefit on the $7,500 tax incentive under the newly proposed bill? What if we ask for the closing date to be Dec 31, 2009 and to move in on Jan 22, 2010. Would that give us the possibility to benefit on the $7,500 under the newly proposed regulations?

  76. Anonymous

    Can someone clarify whether or not a first-time home buyer who purchased in 2008 will be able to receive the $7,500 and not have to pay it back? There are conflicting comments on this post and if someone can site a specific source on the clarification, I’d appreciate it. Thanks!

  77. Anonymous

    Anyone who lives in the US should be used to the fact that ordinary conscientious folk get shafted in order to accommodate a few outliers. I’m not wasting energy objecting to that part.

    Those (Eric, Booch37) are some decent justifications for the home sale tax credit. If the point of the credit is just to give an incentive to make a sale (and pay off both the buyer and the seller), then, yep, it’s going to do that.

    Perhaps $2.5 billion of inflation, plus the disincentive to wealthy folk to get in the game, is not too much to spend simply for liquidity in a market. But I think it is. The long-term market will be healthier without constantly changing the pressure put on it by fiscal policy.

  78. Anonymous

    I’m still holding out hope for the $20,000 tax credit for first-time home buyers. Doesn’t seem like it will make the stimulus plan. I wrote about it in my latest post. It seems like that is the hot topic these days 🙂

    Stupidly Yours,


  79. Anonymous

    Another point…I believe the purpose of this credit is to “inflate” prices by spurring demand. We have seen a 30% drop in values over the last two years and this only serves to breed further foreclosures as more folks who have “no skin in the game” decide to let their houses go which perpetuates the cycle. I am not sure that a little upward pressure on prices right now is a bad thing…this small effort will certainly have no impact like the subprime lending issues had on inflating prices so I am all for it. In fact I hope they increase the credit to make it more meaningful or at least extend it to all buyers.

  80. Anonymous

    I’m settling on my home Feb. 27th, 2009. I am getting my loan through the USDA. I have two questions…Am I eligible for the credit or is the USDA considered one of the tax exemp mortgage bonds that are ineligible? And if i file my taxes now do I put the purchase on that has not occurred yet or do I wait until after settlement to file?

  81. Anonymous

    Now, I’m no economist, but just because a $7500 credit is offered to “first time homebuyers” does not mean that the price for every house is going to be inflated by that same $7500. Not everyone in the market will qualify for the credit. Will the price for houses increase a little bit due to this credit? Perhaps. But because the majority of those in the market to buy a home probably don’t qualify for this credit, home prices will not be affected too much.
    As was mentioned previously, I’m hoping the credit will be extended to the end of 2009, but I won’t be complaining if can’t get into a house in time to take advantage. The government is under no obligation to make this sort of tax credit, so it should come as a nice surprise for those that qualify.

  82. Anonymous

    We purchased a new home in the timeperiod to qualify for this tax credit (Aug 1, 2008).

    My wife owned a home prior to us being married. When we bought the above mentioned home, it was my first home purchase.

    Do we qualify for the credit since it’s my first home purchase, my wife’s second, however we weren’t married when the first was purchased?

    I looked over the entire IRS document, no detail on that question.

  83. Anonymous

    [Angie] “Won’t this just artificially inflate home prices by $7,500 negating the credit altogether?”

    [Brandon] … think of the PMI implications. Let us say you … would normally only have 3% to put down on a new home … for $150,000 ($4500 down). Even if the housing price is artificially inflated $7500, you are now able to put down $12,000 which is 7.6% of the purchase price.

    [Me] Fantastic — so this creates even *more* value for the buyer, which means that the home price will inflate *beyond* $7500. This bill has still failed to magically create value, but it’s actually made it more expensive for lots of people (e.g. those who do have the down payment) to buy houses.

    Don’t forget about the folks with AGI above $75000, who don’t get the credit but are faced with higher house prices. This is pushing them *away* from buying.

    Congress isn’t even thinking about things anymore. This bill clearly benefits the seller about as much as the buyer — it’s a free market; the home price will settle somewhere such that the buyer and seller both benefit. This bill creates just as much incentive to *sell* a house as it does to buy one.

  84. Anonymous

    “I discovered today that if you purchase a house in the proper period of 2009, you may amend your 2008 return to count it as having been purchased on December 31st, 2008. The upside is you get the money quicker, but the downside is that you will have to start paying it back a year sooner.”

    I don’t think that it is “treating” the purchase as if it occurred early, the provision just allows you to elect to take the credit early if you want to. The purchase date for tax purposes still remain the same.

  85. Anonymous

    “Won’t this just artificially inflate home prices by $7,500 negating the credit altogether?”

    I worried about this as well, especially if it becomes a true credit. That said, you do have to think of the PMI implications. Let us say you are a cash strapped homebuyer who would normally only have 3% to put down on a new home (I think that is the minimum for an FHA loan). You live in a relatively inexpensive area so you are able to find a starter home for $150,000 ($4500 down). Even if the housing price is artificially inflated $7500, you are now able to put down $12,000 which is 7.6% of the purchase price. I am not sure exactly how much that saves you, but I think you would be off PMI a couple of years earlier than otherwise.

    As an aside, I think the most annoying thing about the paid back version of the credit is that you have to remember it every year for 15 years. Do you think they are going to send out reminders? 🙂

  86. Anonymous

    nickel: I read the article, but I was just pointing out an alternate idea if the conversion to a true credit did not pass.

    Actually, now that you mention it though, the wording for filing an amended return (or a normal return if you buy before 4/15) is that you “treat the purchase as though it occurred on 12/31/2008”. I feel extra sorry for anyone who does that then finds out that only purchases treated after 1/1/2009 get a fullly refunded credit. I wonder if you could amend your amendment, return the loaned credit, and wait until 2009 to refile. If enough people did this, then we would have a whole new sort of Refund Anticipation Loan crop up!

    All of that said, whether or not they make it a true credit, I wish they would extend it to at least the end of 2009. I hate being pressured to ‘must-purchase’ by a particular date to get a great bonus.

  87. Anonymous

    I am still considering taking this “loan”. We bought our house in April 19,2008 and I am thinking just to put the money in a high-yielding and if we sell in the next few years we won’t have to worry about not having the money. Any thoughts?

  88. Anonymous

    According to the article in my local paper (Columbus Dispatch) the house version of the bill will remove the repayment provision for all buyers dating back to the orginal passage. (see dispatch home and garden section from Sunday paper)

  89. Anonymous

    Man… This thing has “use it and abuse it” written all over it! You already know that every builder under the sun is going to incorporate this into their marketing plans and sales pitches. So, rather than making horrible decisions with your own money – you are now free to make horrible decisions with your money AND the tax payers money!

    I can see the following happening:

    1.) A very few smart people out there will actually use this credit to their advantage. I have a feeling that most of the people in this group would have eventually bought a home anyways, with or without the credit, thus negating it’s true intention.

    2.) A lot of dumb people will rely on this credit to help them purchase something that they shouldn’t have been looking at to begin with and we’ll be right back to square one.

    I just don’t see this thing having the intended effect. At best, it will most likely end up being a very expensive failure.

  90. Anonymous

    So now, is there some way that I could co-sign a mortgage with my fiance so he could qualify. Then he could receive the credit because his AGI is below the limits… There’s got to be a way around this so I could figure out how to receive it!

  91. Anonymous

    I love it.

    In order to deal with a housing bubble caused by loose lending standards which encouraged over-investment in houses by people who couldn’t afford them, we’ve decided to lend even more money specifically to encourage housing purchases by people who otherwise couldn’t afford them.

  92. Anonymous

    nickel: Sorry about that, I wasn’t trying to imply that you were claiming the change was fair, rather it was a comment on the government changing the loan to a credit for part of the target audience covered under the original purchase time frame.

  93. Jared: I never said it’s fair. I just said that it makes sense. Assuming that he goal is to encourage people to go out and buy houses, how will giving money to people who already bought houses further that goal? We could debate fairness all day long. After all, when we bought our house in 2006, we weren’t offered any sort of incentive, not even the interest free loan that those in 2008 received. At some point, you have to draw a line, and those that fall just short of that line will be upset.

  94. Anonymous

    I discovered today that if you purchase a house in the proper period of 2009, you may amend your 2008 return to count it as having been purchased on December 31st, 2008. The upside is you get the money quicker, but the downside is that you will have to start paying it back a year sooner.

  95. Anonymous

    I still say it’s unfair.The people who bought a home on April 9, 2008 and before July 1, 2009, inclusive, are exactly the target audience especially since the housing market was well into the slumps before this time frame hence the reason the “credit” exists in the first place.Now, by changing the rules, the suckers who bought a house between April 9, 2008 and December 31, 2008 are the ones who will be repaying the loan.

    It’s too bad we didn’t wait in purchasing our home (May 30, 2008). The homes that were for sale when we bought are still for sale for a whole lot cheaper and we could have gotten a free $7500 to boot.

    I still find it funny that the whole reason we are in the mess is because it became easier and easier to put people who couldn’t afford a home in a home. This “credit” and the future revision do little to change that.

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