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"UP TO" $8000 - it is not an across the board $8000 first time home buyers tax credit.

By Kris Wales

Real Estate Agent with Keller Williams Realty - Lakeside Market Center

November 08, 2009 09:36 PM

One of the common misconceptions for home buyers (and some real estate professionals) is that the first time home buyers tax credit is $8000 for all buyers.

When reading the fine print of the IRS form 5405 there is an entry line to fill out asking for the smaller of 2 items: $8000 or 10% of the purchase price.

An example: Mr. Smith purchases a home for $65,000. If he meets the criteria to receive
the 1st time home buyers tax credit he would enter $6500 on line #1 of form 5405. If Mr.
Smith purchased a home for $90,000 then he would enter $8000 on that line.

IRS tax form for 1st time home buyers credit

Reiterating: The tax credit is for 10% of the purchase price of the home up to $8000. It is not a full $8000 for every home buyer.

Let's all help to stop the confusion to home buyers by using the words "Up to" in our articles.

Edit: The chart that NAR put out for their members to use states "$8000" but it doesn't say "Up to $8000". You may want to add the language to your own charts for accuracy.

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Kris Wales

Keller Williams Realty - Lakeside Market Center - Macomb, MI

Real Estate Blog & Homes for Sale search site, Macomb County MI

William,   I really liked that idea myself. (And also proving that you purchased a house!!) It would save on the confusion.

The Kasey Group,   Thanks for posting the link, I'll check it out.

Michelle,   If buyers are purchasing now solely because of the credit they should know all the ins and outs..all of them. Thank you.

Dawn,   I'm going to create my own chart - one I hope will be less confusing for people. Thanks Dawn.

Alyssa, No, we do not. That's the last thing a buyers agent wants to do.

Stephanie, You're welcome. Thanks for reading and commenting.

Nov 09, 2009 06:12 AM

Kris Wales

Keller Williams Realty - Lakeside Market Center - Macomb, MI

Real Estate Blog & Homes for Sale search site, Macomb County MI

John,   I think the builders association put the first one out online and it was good. Very accurate. NAR has a chart now, but they forget to add "up to" :-) I'll be working on my own tomorrow morning.   You're absolutely right, direct them to the sources that are accurate and pertain to them. Not the hyped headlines :-)

Kyle,   Thanks for the link, I'll check it out.

Casey,   If it doesn't apply in your area, you don't have to note it. Many areas of the country though have sales under $80,000. That's why I wrote this.

Allen,   Thank you. Sounds like your area also sees the first time home buyers spending under $80,000.

Corinne, Thanks. No, I wouldn't imagine that the buyer of that home will bother to claim the credit for a 1 cent refund :-)

Nov 09, 2009 06:17 AM

Ken Speer

Alpha Global Associates - Phoenix, AZ

Great post. Thanks for the reminder. Amazing how improtant those "little" words can be.

Nov 09, 2009 06:19 AM

Paul Silver

Tiverton, RI

Rhode Island full service real estate firm

It is very important that we as professionals understand this and convey the information properly to our clients and customers. If we dont get it, how will they?

Thanks for the reminder.

Nov 09, 2009 07:11 AM

Katie Flansburg

Austin, TX

Yes! Thank you for posting this! I sell some homes for $4,000 sometimes and I am always surprised when the buyer mentions how they want to get the $8,000 tax credit. Thanks for helping to educate everyone!

Nov 09, 2009 07:45 AM

James Lyon

Vista Pacific Realty - Sacramento, CA

Thanks for pointing that out. There are still some areas here in Sacramento where this would apply.

Nov 09, 2009 08:58 AM

Lola Audu

Lola Audu~Audu Real Estate~Grand Rapids, MI Real Estate - Grand Rapids, MI

Audu Real Estate~Grand Rapids, MI ~Welcome Home!

Kris, I appreciate your clarifications through this blog post. Your post the other day on this issue was also very good. The devil is in the details here & when dealing with issues that impact people's tax liability, accuracy is crucial.

Nov 09, 2009 12:44 PM

Damon Gettier

Damon Gettier & Associates, REALTORS- Roanoke Va Short Sale Expert - Roanoke, VA

Broker/Owner ABRM, GRI, CDPE

I sent out an email to my agents giving the run down of the tax credit and wouldn't you know the very next day I saw a post by one of them stating that the dates were May 1 and July 1....when I corrected him he acted as though I was nit picking.

Nov 09, 2009 12:55 PM

Terry & Bonnie Westbrook

Westbrook Realty Broker-Owner - Grand Rapids, MI

Westbrook Realty - Grand Rapids Forest Hills MI Re

We do have to make sure we advise clients with good info. It is easy to talk about the maximum.

Nov 09, 2009 01:08 PM

Paul Warner -- Orange County, CA Appraiser

Warner & Associates - Mission Viejo, CA

If the buyer purchases an $80,000 property but only owes $5,000 in federal income tax, does the $3,000 extra tax credit carryover into subsequent years or is it lost? Or can it also be applied to social security tax liability?

Nov 09, 2009 03:12 PM

Christine Donovan

Donovan Blatt Realty - Costa Mesa, CA

Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Kris,

I had realized this previously. However, in Orange County, even with a big drop in price, you would have to try hard to buy anything under $80,000.

Nov 09, 2009 03:42 PM

David Dee

RMX REALTY - Alhambra, CA

Real Estate - San Gabriel Valley (L.A.) & N. Orang

From the desk of David Dee,

Kris, I noticed that "up to" credit as well. However, I don't believe we have issue here as there is nothing under 100k but it would have been nice. Good post and reminder.

Nov 09, 2009 03:51 PM

Joe Bourland

RE/MAX Professionals - Avondale, AZ

Joe Bourland, REALTOR, CRS, ABR, CDPE, QSC

During a recent buyer counseling session, the confusion of the credit was evident. "So, can I get the $8,000 at closing?" was Holly's question. Um, no. Then the reality that they will have to wait months before the credit money will be in their hands. Glad to have had that discussion at the begin of our journey not the end.

Nov 09, 2009 04:35 PM

Joe Bourland

RE/MAX Professionals - Avondale, AZ

Joe Bourland, REALTOR, CRS, ABR, CDPE, QSC

Nov 09, 2009 04:35 PM

Kris Wales

Keller Williams Realty - Lakeside Market Center - Macomb, MI

Real Estate Blog & Homes for Sale search site, Macomb County MI

Ken,   Thank you. Glad you stopped by.

Rhode Island real estate,   We should be sure we're explaining it correctly, and sending them to those that can clarify. (Accountants, IRS web site, etc.) Thanks.

Katie, I can see how buyers would be confused, the hype all says $8000 as if it is a flat rate. Your buyer must have thought they hit the jackpot!

James, You're welcome. Glad it helped you.

Lola,   Thank you. We're in different waters here now, compared to 10 years ago. More details than ever, so we need to be on top of these things.

Damon, Ughh...I bet this same agent would come to you for help if a buyer wanted to sue him for misinformation :-)   He wouldn't think you were "nit picky" then..

Terry,   You betcha. Good to see you.

Paul,   That would be a good question for an accountant, and I'm not an accountant :-) I wouldn't touch that question for my buyers client but refer them to their tax professional.

Christine,   Then you wouldn't have to worry about it, unless your prices decline further.

David Dee,   Sounds like other areas of the country where this wouldn't make a difference.

Joe, I bet you were glad to hear that question at the initial meeting and not at the closing table :-)

Nov 09, 2009 07:51 PM

Rich Cotton

Rich Cotton The Waterfront Specialist EXiT Preferred Realty - Chesapeake City, MD

Waterfront Specialist Cecil and Kent Counties MD

Kris,

I didn't Know there was a 10% clause. It would have little or no impact in my market...average price $250,000.

Nov 09, 2009 09:43 PM

Monica Bourgeau

Portland, OR

Business Coaching

Wow - wish I could find a house for $65,000 in our area. Good point that it should be included on the summary though because I guess it could be possible.

Nov 10, 2009 03:31 AM

Mario Blautzik

TBA - Rockville, MD

Kris, this post is probably saving a home buyer, some where, some grief because of the expectation of receiving the full $8,000. Great Post

Nov 10, 2009 03:35 AM

Kyle Jan

Scottsdale, AZ

Phoenix AZ Homes for Sale

Here is another good link for those looking to get the more difficult questions answered.

http://www.irs.gov/newsroom/article/0,,id=206294,00.html

Nov 10, 2009 06:54 AM

Kris Wales

Keller Williams Realty - Lakeside Market Center - Macomb, MI

Real Estate Blog & Homes for Sale search site, Macomb County MI

Rich,   It sounds like you won't have to worry about the accuracy of the articles on the tax credit. Many markets don't. Thanks.

Kevin and Monica,   In many markets (like mine) it is very common. Thank you.

Mario, If more people would write about this perhaps it would help to counteract the multitude of "$8000" posts. Thanks Mario.

Kyle,   Thanks so much for the link. I have it bookmarked and will definately use it. Much appreciated.

Nov 10, 2009 09:52 PM