Tiffany Osterli, REALTOR® - Bringing Your Dreams Home

Yuba City, Marysville, Plumas Lake, Sutter, Live Oak, CA Real Estate and Homes for Sale

BRE #01408438
2008 First-Time Homebuyer Federal Tax Credit
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The 2008 first-time homebuyer tax credit, enacted as part of the Housing and Economic Recovery Act on July 30, 2008, applies to home purchases made after April 8, 2008 and before January 1, 2009.
The 2008 credit is essentially a no-interest loan of up to $7,500 or 10 percent of the purchase price of the home, whichever is less.  Typically, repayment is to be made in 15 equal annual installments as a surcharge on the taxpayer's federal income tax return.  To qualify, in general, taxpayers must have purchased their home as their principal residence during the eligibility period, must NOT have owned a home during the three years immediately preceding the purchase, and must NOT have earned more than the program's phase-out income limitations.  Other limitations and requirements apply, as discussed below.
Eligibility Requirements:
  • You must have purchased (or built) your home as your principal residence after April 8, 2008 and before January 1, 2009.
  • You must be qualified as a first-time homebuyer, meaning you must NOT have owned your principal residence at any time during the three years immediately preceding the home purchase.
  • You must be a U.S. citizen or resident alien (non-resident aliens are not eligible).
  • Your 2008 modified adjusted gross income (MAGI) must NOT have exceeded $95,000 ($170,000 for joint filers).
  • You must NOT have purchased the home from a close relative (i.e., spouse, parent, grandparent, child, grandchild).
  • You must NOT have been eligible to claim the District of Columbia first-time homebuyer tax credit in any tax year.
  • Your financing must NOT have come from tax-exempt mortgage revenue bonds.

Amount of the Credit:

  • In most cases, the amount of the credit will be the lesser of $7,500 or 10 percent of the purchase price of the home.  For example, if you bought a home for $65,000, your maximum credit would be $6,500 (10 percent of $65,000).  If you bought a home for $120,000, your maximum credit would be $7,500 (because $7,500 is less than $12,000, which is 10 percent of $120,000).
  • In certain cases, where the taxpayer's 2008 MAGI fell within the phase-out range of $75,000 to $95,000 ($150,000 to $170,000 for joint filers), the taxpayer's maximum credit is reduced on a sliding scale, where taxpayers making just over the phase-out threshold max out their credit close to $7,500, while taxpayers approaching the $95,000 phase-out cap max out their credit close to zero.  If your 2008 MAGI fell within the phase-out range, you should consult a qualified tax professional for more information on your maximum credit.


In general, repayment is to be made in 15 equal installments (divide the maximum credit for which you are eligible by 15), starting in the second year AFTER the credit is claimed.  For most people, the first payment will be due with their 2010 income tax return.  Repayment will be made as a surcharge on the taxpayer's tax return.  Exceptions include:

  • Death - If you die before repayment is completed, no additional payments will be required.  Surviving joint filers are responsible only for half of any remaining payments.
  • No longer using the home as your principal residence (i.e., making a second home your primary residence, converting the home to a vacation property, business, rental property, etc.) - You will be required to repay the remaining balance in the tax year with your tax return for the year in which the conversion occurs.
  • Sale of home - If you sell your home, any remaining balance will be due with your tax return for the year in which the conversion occurs, except that total repayment is limited to any gain from the sale of the property.
  • Transfer to spouse (or former spouse in a divorce) - Your spouse (or former spouse) will be responsible for paying the remaining installments each year until the balance is paid.

For more information on the 2008 credit, see the IRS' informational page.

As always, for questions on matters pertaining to your personal income taxes, the Dream Team recommends that you consult a qualified tax professional.



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