$8000 Tax Credit for First Time Home Buyers in Wisconsin and Illinois

$8,000 Tax Credit for First Time Home Buyers in Illinois and Wisconsin

Updated November 2009:

On Thursday of last week the extension and expansion of the Homebuyer Tax Credit passed through the House of Representatives. On Friday the President signed it.

The bill extends and expands the $8,000 homebuyer tax credit through April 30, 2010. The bill also revises income limits and would allow a $6,500 "move-up" buyer tax credit for those who have lived in their current principal residence for 5 or more years. In addition, the bill will allow borrowers who have entered into a contract by April 30th to have 60 days (June 30th) to complete the transaction.

You can read highlights of the updated bill on our blog

The American Recovery and Reinvestment Act of 2009 was just signed into law. One of the major provisions provides an $8,000 tax credit to qualified First Time Home Buyers (as well as those who have not owned a home in the last three years)

$8000 tax credit highlights:

The $8000 tax credit or 10% of the home's purchase price, whichever is less, is available only for first time home buyers (Definition of a "first time home buyer" is a buyer who has not owned a principal residence during the three-year period prior to the purchase)

There is a $75,000 adjusted gross income limit for tax filers filing as single and $150,000 limit for joint return filers.

The $8000 tax credit is available only for primary residence purchases.

The tax credit does not require a repayment in most cases.

The tax credit does have a repayment provision if the homeowner does not occupy the property for a minimum of 3 years from the closing date.

The home buyer must purchase a home between January 1, 2009 and December 1, 2009.

The $8000 tax credit is received when you file your tax return.

Frequently Asked Questions:

How do I claim the tax credit? Do I need to complete a form or application?
Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.

I read that the tax credit is "refundable." What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.

For additional Frequently Asked Questions please visit the FAQ section of the Federal Housing Tax Website

Keep in mind that if you purchased a home between April 9, 2008 and December 31, 2008, you are still eligible for the $7500 tax credit. This tax credit does have a repayment provision to be paid back over 15 year’s interest free. You can read more about the $7500 tax credit for additional information.

Please consult your tax accountant to be certain you meet all the requirements. Your accountant will have a simple form to fill out on your 2009 tax return and you will be granted the refund. This is not a deduction but a refund.
Download Tax Form for Your Accountant: Click Here