Make us your home page
Instagram

Congress may change home buyer tax credit for the better

WASHINGTON — Should you give the $7,500 home buyer tax credit a second look? Now that Congress may be on the verge of transforming it into a true tax credit — one that never has to be paid back — you just might want to do so.

On Jan. 15, the House Democratic leadership outlined its $825-billion economic stimulus package, loaded with $275-billion in tax cuts and $550-billion in new spending on health care, education, alternative energy and infrastructure improvements.

Tucked away in the tax section was a significant improvement to last July's congressional effort to stimulate home sales. That program offered a credit of up to $7,500 to purchasers who had never bought a house or hadn't owned one during the previous three years. To qualify, taxpayers would need to close on a house between April 8, 2008, and this coming July 1.

But relatively few consumers were attracted to the plan because unlike virtually all other federal tax credits, this one had to be repaid in full to the IRS over a 15-year period. In effect, the $7,500 was more like an interest-free installment loan from the government than a straightforward dollar-for-dollar reduction on buyers' tax bills.

Though final details on a revised credit are still subject to negotiations between the House and Senate — and to passage of the economic stimulus package itself — there's a good chance that buyers who sought the credit in 2008, and new purchasers in 2009, will be relieved of the repayment requirement.

According to industry estimates, removing the repayment rule could lead to an additional 202,000 purchases this year. The National Association of Realtors is pushing for the July 1 deadline to be extended to Dec. 31, opening the door to even greater numbers of sales.

Meanwhile, the IRS has come out with two recent advisories on the credit, plus a new Form 5405 for taxpayers interested in claiming the $7,500 benefit, either for 2008 or 2009. You can download a copy of the form at www.irs.gov in the publications and forms section.

Based on the latest IRS guidance, here's what you need to know if you're thinking about buying a house this year — taking advantage not only of low prices and record low mortgage rates, but a temporary tax credit that may well turn out to be nonrepayable:

• The $7,500 is available to singles, married couples filing jointly and unmarried co-purchasers, provided they meet the nonownership test for the previous three years. Married couples filing singly can claim up to $3,750 each. Unmarried individuals can allocate the credit on their filings according to their respective ownership shares or capital investments in the house.

• Only principal residences — or in the words of the IRS, "the one you live in most of the time" — are eligible. No second homes, investment properties or houses outside the United States pass the test. However, the definition of "home" extends far beyond conventional houses sited on lots. It "can be a . . . houseboat, housetrailer, cooperative apartment, condominium or other type of residence," according to Form 5405. For example, if you buy a sailboat or powerboat with full living facilities, tie it up at a marina and make it your "main home," you should be eligible to claim the credit, though you may want to run all the specifics of your situation by your accountant or tax adviser.

• Even if it's your first home purchase, you are not eligible if your adjusted gross income is above $95,000 (single filer) or $170,000 (married joint filers). Married couples with incomes between $150,000 and $170,000 are eligible for reduced credits, based on a phaseout schedule. Single filers with incomes between $75,000 and $95,000 also are subject to reduced credit limits. District of Columbia residents who are eligible for the city's first-time home buyer credit are barred from use of the federal tax credit. Taxpayers who use tax-exempt mortgage bonds issued by state or local governments to finance home purchases also are ineligible.

• You can't claim the $7,500 credit if you buy your house from a "related person," meaning a spouse, parents, grandparents, children or a corporation or partnership in which you own more than 50 percent of the stock or capital interests.

If you pass all these tests, and get the purchase done by whatever deadline date Congress decides as part of the final stimulus package, you should be able to take $7,500 off your federal tax bottom line and not worry about ever paying it back.

Ken Harney can be reached at [email protected]

Congress may change home buyer tax credit for the better 01/23/09 [Last modified: Friday, January 23, 2009 3:30am]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Tampa's streetcar system looks to expand north through downtown

    Transportation

    TAMPA — The TECO Line Streetcar system that runs from Ybor City to the Channel District could be extended north through downtown all the way to Tampa Heights, according to the latest update of a $1.7 million study aimed at expanding the streetcar system.

    Riders take in the last few stops of the streetcar route in Ybor City during the tenth anniversary celebration of the TECO line streetcar system in Tampa in 2012. Now officials are looking for ways to expand the service north through downtown to Tampa Heights. [EVE EDELHEIT  |  Times]
  2. Tampa Bay small businesses give Tampa B+ for regulatory climate

    Corporate

    In a recent survey about small business sentiments toward state and local government policies that affect them, Tampa Bay ranked at No. 25 out of 80 — a B+ overall.

    Tampa Bay ranked No. 25 out of 80 in a recent survey about how small business owners feel about state and local government policies that affect them. | [Times file photo]
  3. Seminole Heights restaurants face struggles amid killings, post-Irma

    Food & Dining

    TAMPA — The neighborhood's hip circle of popular, well-regarded restaurants is feeling the squeeze in the wake of a recent killing spree. And the timing is rough.

    Ella’s Americana Folk Art Cafe has been taking precautions in light of the Seminole Heights killings: keeping the lights on all night and having employees walk to their cars in groups.
  4. St. Pete-Clearwater holding food, supply drive for hurricane refugees

    Airlines

    CLEARWATER — St. Pete-Clearwater International Airport and Allegiant Air are holding a food and supply drive for the Hispanic Outreach Center in Pinellas County. The event, which will benefit refugees displaced by Hurricane Maria, will be held Tuesday from 5 p.m. to 8 p.m. at the airport at 14700 Terminal Blvd.

    St. Pete-Clearwater International Airport and Allegiant Air are hosting a food and supplies drive Tuesday for refugees displaced by Hurricane Maria. | [Times file photo]
  5. Tallest building in Pinellas County in search of a new name

    Real Estate

    ST. PETERSBURG — The name "Priatek" is gone from Pinellas County's tallest building, perhaps to be replaced by that of a much better-known company new to the Tampa Bay area.

    The Priatek name is off of downtown St. Petersburg's tallest building.
 [LARA CERRI  |   Times.  2015]