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How does the $8,000 first time home buyer tax credit actually work?

Answers:1   |   LastAnswerAt:2009.12  

Asked at 2009.12.18 23:47:30
Please explain to me (as if your speaking to a two year old) how this works. I've asked before, and was NOT very satisfied with the answers I received.

I know it is different, and separate from the current $7,500 loan being offered.

- Is this $8,000 automatic for all first time home buyers or do you need to qualify based on how much you make?
- Is it money that is given to you to put towards the home purchase?
- Or, is it something you'll get back in 2010 when you file 2009 taxes?

Obviously, if I were already a home owner or understood more about the tax system I wouldn't need to ask this so please explain it to me with out using any tax jargon or assuming I understand.
answer Matt  Answered at 2009.12.18 23:47:30
1 - It is automatic, unless you make $75,000 (single) or $150,000 (married) - I believe these are the income restrictions.

2 - You cannot get the credit until AFTER you close on your home, so it comes after you have bought your house.

3 - You can claim it on your 2008 or 2009 taxes (but to do it on your 2008 taxes you will need to wait until it is signed into law, which is supposed to happen Monday)

This takes the place of the $7,500 loan, and is basically a refundable tax credit, meaning if you owe $0 in taxes, they will cut you a check for $8,000. If you owe $1000 in taxes, they cut you a check for $7,000. And so on.
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