Homebuyers Tax Credit

[BHoffman]

http://www.webcpa.com/article.cfm?articleid=30697&page=1

I have a nice young newlywed couple who bought their first home in 2008. They are curious about their eligibility for tax credits. So am I.

Is this kicking in for 2008 tax returns? Please advise? Thanks.

[Koss]

Yes

I did one the other day.

There are some restrictions, and some limits on AGI, and some other stuff to be aware of. For example, the taxpayer doesn't qualify for the credit if the home was financed with some sort of tax-exempt bonds...

But in general, it's pretty straightforward. The credit is 10% of the purchase price, up to a maximum of $7500. The credit is fully refundable. It functions as a payment, just like withholding, EIC, and Additional Child Tax Credit.

Make sure your client understands that the credit has to be paid back, and that under certain conditions the repayment can be accelerated.

Also: For purposes of calculating the credit, the purchase price may include some closing costs.

BMK

[dustoffgirl]

Credit we all call it a loan

Easy way to rember this so called credit has to be a first home purched on or after April 9, 2008 and before July, 2009 lesster of 10% of purchase price or $7,500 bucks and then you get to pay it back over 15 years intrest free. Sounds like a intrest free loan to me. There is also lots of lovely strings attached if you divorce, or for aliens, or if it was a gift, so if your couple is from California where divorce runs rappid and so does everyone crossing the boarder. I would forgo the lovely credit because we all know that they will never put it on their return in 2009 and come back and blame us for their audit. Check TTB page 11-3

[BHoffman]

Yabbut...follow the link. Looks like those mischievous imps have decided to improve the credit and increase the amount to $15,000, the article says no repayment, and the article says TP doesn't have to be a first time homebuyer. What's confusing is that the article says it would be effective for TY 2008. I guess we'll have to wait and see if that will result in amended returns or what. My kids are curious. As young newlyweds, naturally they need the $$.

[thomtax]

Had this question today. After I explained that although it is called a credit, it is actually an interest free loan to be paid back. In reality it is not a credit. He said "I'm not interested in that then."

LT

[tilt53]

But it's part of the whole package

The Senate may have approved this, but it still has to be reconciled with the House package.

"The Senate may vote as soon as Thursday night on the bill, but if it is approved, it will need to be reconciled with the House version."

[JohnH]

Although I refuse to prepare any returns claiming the credit due to liability concerns on my part, I certainly believe anyone eliigble to do so should claim it. (They just need to go somewhere else to get the return prepared) There's no downside to having a 15-year interest-free loan unless they're just too undisciplined to follow the rules.

I'd also recommend that they use all or most of the credit to make a principal reduction payment on their home mortgage so that on a balance-sheet basis they are matching the credit to the underlying asset which generated it. Over the life of the payback period, this effectively doubles the value of the credit. Alternatively, they could use the credit to pay off higher-interest debt if they have any, which produces an even greater yield on the investment.

If I can draw a comparison, the Home Buyer Credit is esentially the equivalent of a Section 179 write-off on a business asset, except we're dealing with the liability side of the equation rather than the asset side. You're not really getting anything extra - you're just getting it early. And if the credit is ultimately converted to a status that it isn't required to be repaid, they are even better off.

[BP.]

Is this kicking in for 2008 tax returns? Please advise? Thanks.

TTB 11-3&4
Can be used on 2008 return, amended, with purchase between 1 Jan 09 and 30 Jun 09.

[BHoffman]

Thanks, BP. I meant the new and improved Home Buyer's Credit of $15k, no repayment, and you don't have to be a first time homebuyer.