How the $8000 Tax Credit Helps Home Buyers in Rhode Island

This is a follow-up to my last post on the $7500 tax credit for first time home buyers which has now been revised in the new Stimulus Bill just signed by President Obama. The amount of the credit has been increased to $8,000.  Here is how it works:

First time homebuyers are entitled to a tax credit of 10% of the purchase price up to a maximum of up to $8,000  provided they meet the following requirements:

- Must have not purchased a home within the last 3 years.

- Income (adjusted gross- AGI) is less than $75,000 for individuals and $150,000 for joint filers

- Must purchase and close on the home before December 1, 2009

- The credit will be taken from the amount of tax due or given back on a refund. For example, If you owe the IRS 10,000 and qualify for the deduction, you will pay the IRS a net amount of $2000.  If the IRS owes you $2,000 as a refund and you qualify for the tax credit, you will get a check back from the IRS for $6,000.

It is best to check with your accountant on all of this.  

For the first time home buyer, this is absolutely great news.  I know it may be disappointing to those that were expecting the $15,000 credit proposed by the senate, but the $8000 is a vast improvement over the earlier $7500 which was essentially an interest free loan. This credit DOES NOT have to be paid back UNLESS you sell the house before 3 years.  So 3 years and one day and the money is yours to keep.   

Here is the direct language from the bill as reported by CSpan. 

From C-Span:

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 eliminates the repayment obligation for taxpayers that purchase homes after 

January 1, 2009, increases the maximum value of the credit to $8,000, and removes the 

prohibition on financing by mortgage revenue bonds, and extends the availability of the credit 

for homes purchased before December 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 $6.638 

billion over 10 years.   

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