American Recovery and Reinvestment Act of 2009

The Treasury Department has moved at record speed to implement one piece of the new American Recovery and Reinvestment Act of 2009 aka the stimulus act.

The Department and the Internal Revenue Service which will manage it announced that forms and regulations are already in place for homebuyers who wish to claim the first-time credit enabled under the act.

The credit is available to homebuyers who purchase a home before December 1 of this year.  In an effort to make the effects of the credit felt quickly in the economy, homebuyers can claim the credit either on their 2009 tax return or on their 2008 return if filing late by extension.

The tax credit represents 10 percent of the purchase price of a home up to a maximum of $8,000 or $4,000 for married taxpayers filing separate returns.   The $7,500 credit that was authorized under earlier legislation last year was actually a 15 year loan; the new tax credit does not have to be repaid by the homeowner under ordinary circumstances.

The credit does have to be repaid if the homeowner sells the home in less than 36 months or if the home ceases to be his principal residence during that time.

For the purpose of this credit, a first time homeowner is defined as one who has not owned a home for the 36 months ending on the date of purchase.The credit is available to taxpayers with adjusted gross incomes up to $75,000 or $150,000 for married taxpayers filing jointly.  Above those income levels the credit is phased out gradually.Homeowners who purchased a house between April 8 and December 31, 2008 are not eligible for the new credit.  They are covered by the earlier legislation and can claim the $7,500 repayable credit.

Treasury Secretary Tim Geithner said in a press release from his department, “The expansion of the first-time home buyer tax break as part of the President’s recovery agenda gives money to taxpayers when they need it most, while also targeting an important group of buyers.  We view our economic recovery plan, our financial stability plan, and now this homeowner affordability plan as three legs of the same stool – an integrated whole that represents our immediate response to the current crisis.”

Forms and instructions for claiming the credit on 2008 tax returns are available at  The form number is 5405.

In short:

Who is eligible for the $8,000 tax credit?

  • First-time homebuyers who have not owned a principal residence for three years prior to purchase.
  • The home must be purchased between January 1, 2009 and before December 1, 2009 (special note: the final date is December — not Dec. 31).
  • Buyers must make less than $75,000 for singles or $150,000 for couples (higher-income buyers may receive a partial credit).

How can I claim the $8000 tax credit?

  • You can claim the tax credit on the 2008 tax returns due April 15 or on the 2009 tax returns next year. Or, if you’ve already completed your tax return, you can file an amended return to claim the credit.
  • The claim can be 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.
  • Claim the tax credit on your federal return by completing IRS form 5405 to determine your tax credit amount, and then claim this amount on Line 69 of your 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary.

Does it have to be repaid?

  • No. Unlike the $7,500 tax credit that needed to be refunded under last year’s Housing and Economic Recovery Act, this does not have to be repaid as long as the home is your main home for 36 months after the purchase date.

More information on $8000 tax credit:

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