What Was the First-Time Homebuyer Tax Credit?

The federal first-time homebuyer tax credit was available to Americans purchasing their first homes from April 2008 through September 2010. It has expired, but prospective homeowners can still use a number of other 澳洲幸运5官方开奖结果体彩网:federal policies and programs that encourage homeownership. In addition, most states have programs designed to help first-time homebuyers get the deal done.

U♛nderstanding the First-Time Homebuyer Tax Credit

The federal first-time homebuyer 澳洲幸运5官方开奖结果体彩网:tax credit was part of the massive effort to bail out the U.S. economy during the Great Recession that began in 2007–2008. It applied to home purchases made by qualified first-time buyers between April 9, 2008, and July 1, 2009. The Obama administration extended the original time frame, giving buyers until Sept. 30, 2010, to close the transaction.

The Deal in Depth

The 澳洲幸运5官方开奖结果体彩网:first-time homebuyer tax credit allowed a tax credit for a percentage of the purchase price of a home for taxpayers who had not owned their homes in the previous three years. The original program implemented a credit of 10% of the home's purchase price, up to $7♕,500, which had to be repaid over 15 years in equal installments.

An expanded version of the tax credit later increased the maximum to $8,000 and removed the repayment requirement altogether.

The program timed out with homes that were in signed contracts by May 1, 2010, and closed by Sept. 30, 2010.

Who Was Eligible

The first-time homebuyer tax credit was available only to homebuyers with incomes under a set level. When the program began, an individual homebuyer was required to have a 澳洲幸运5官方开奖结果体彩网:modified adjusted gross income (M൩AGI) of ⛄$75,000 to $95,000. The cap for a married couple filing jointly was $150,000ꩲ.

This limit was raised periodically, reaching $125,000 for an individual and $225,000 for a couple in 2010.

The first-time homebuyer tax credit was claimed on Internal Revenue Service (IRS) F🐻orm 5405, First-Time Homebuyer Credit and Repayment of the Credit.

Reporting the Repayment

If required to repay the first-time homebuyerꦛ credit, you must file a federal income tax return, even if the gross income doesn't exceed the return filing threshold. If you made a qualifying home purchase and owned and used the home as a principal residence in all of the last tax year, you must enter the additional federal income🐬 tax on . You don't need to attach Form 5405, Repayment of the First-Time Homebuyer Credit.

If you dispose of the home or if you (and your spouse if married) stopped using it as your principal residence in the last tax year, you must attach a completed Form 5405 for you (and your spouse if married) to 澳洲幸运5官方开奖结果体彩网:Form 1040 or 澳洲幸运5官方开奖结果体彩网:Form 1040-SR.

This information should be added because many individuals do not file when their income falls below the threshold for the tax year. Adding this information puts potential credit recipients on alert of the reporting requirements.

The Reasoning Behind the Credit

The 澳洲幸运5官方开奖结果体彩网:housing bubble of the early 2000s was 𒆙largely caused by dubious mortgage lending practices that became ꦅcommon in the mid-2000s. The primary target market was struggling wage-earners eager for homeownership who were encouraged to borrow more money than they could realistically repay.

The first-time homebuyer tax credit was created to help stabilize a real estate market that went into freefall as a result of the 澳洲幸运5官方开奖结果体彩网:subprime mortgage lending crisis☂. With waves of mortgage defaults and foreclosures, new ꧋home buyers were hesitant to enter the market, and consumer confidence was at a low.

The tax credit was a simple way for the governmenꦗt to offset closing costs and moving costs to get first-time homebuyers into a home without increasing the risk to either the homebuyer or the mortgage lender.

The Bottom Line

The federal first-time homebuyer tax credit was intende✨d to help people buy homes during the Great Recession when times were economically difficult. Though it has now expired, it served its purpose by helping those in distress, encouraging home ownership, and stabilizing the housing marke𝐆t.

There are still options available to assist with buying homes for those who may find it financially difficult. Prospective homebuyers can check with the 澳洲幸运5官方开奖结果体彩网:Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs, and the U.S. Department of Agriculture.