I’ll give you one guess! ;-)

so how will you vote next election?

I can only vote for Nobel laureates.But OMG!! What if Al Gore challenges Obama?

A friend of mine buying the home and getting the credit in two weeks, plans to put the $8k right away towards principal. Does that make it bad? Hell no. Reduces his loan by minute amount still however it is equity.

Depends on his interest rate and whether or not he thinks it’s too high.

Cheap debt should be paid later rather than sooner.

Expensive debt should be paid sooner rather than later.

Code, Regulations, Committee Reports & Tax Treaties
Internal Revenue Code
Current Code
Subtitle A Income Taxes §§1-1563
Chapter 1 NORMAL TAXES AND SURTAXES §§1-1400U-3
Subchapter A Determination of Tax Liability §§1-59B
Part IV CREDITS AGAINST TAX §§21-54AA
Subpart C Refundable Credits §§31-37
§36 First-time homebuyer credit.

Internal Revenue Code
§ 36 First-time homebuyer credit.

(a) Allowance of credit.
In the case of an individual who is a first-time homebuyer of a principal residence in the United States during a taxable year, there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to 10 percent of the purchase price of the residence.
(b) Limitations.
(1) Dollar limitation.
(A) In general. Except as otherwise provided in this paragraph , the credit allowed under subsection (a) shall not exceed $8,000.
(B) Married individuals filing separately. In the case of a married individual filing a separate return, subparagraph (A) shall be applied by substituting “$4,000” for “$8,000”.
(C) Other individuals. If two or more individuals who are not married purchase a principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe, except that the total amount of the credits allowed to all such individuals shall not exceed $8,000.
(2) Limitation based on modified adjusted gross income.
(A) In general. The amount allowable as a credit under subsection (a) (determined without regard to this paragraph) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as—
(i) the excess (if any) of—
(I) the taxpayer’s modified adjusted gross income for such taxable year, over
(II) $75,000 ($150,000 in the case of a joint return), bears to
(ii) $20,000.
(B) Modified adjusted gross income. For purposes of subparagraph (A) , the term “modified adjusted gross income” means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911 , 931 , or 933 .
(c) Definitions.
For purposes of this section —
(1) First-time homebuyer.
The term “first-time homebuyer” means any individual if such individual (and if married, such individual’s spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which this section applies.
(2) Principal residence.
The term “principal residence” has the same meaning as when used in section 121 .
(3) Purchase.
(A) In general. The term “purchase” means any acquisition, but only if—
(i) the property is not acquired from a person related to the person acquiring such property, and
(ii) the basis of the property in the hands of the person acquiring such property is not determined—
(I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or
(II) under section 1014(a) (relating to property acquired from a decedent).
(B) Construction. A residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence.
(4) Purchase price.
The term “purchase price” means the adjusted basis of the principal residence on the date such residence is purchased.
(5) Related persons.
A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b) (but, in applying section 267(b) and (c) for purposes of this section , paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include only his spouse, ancestors, and lineal descendants).
(d) Exceptions.
No credit under subsection (a) shall be allowed to any taxpayer for any taxable year with respect to the purchase of a residence if—
(1) Repealed.
(2) Repealed.
(1) the taxpayer is a nonresident alien, or
(2) the taxpayer disposes of such residence (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer’s spouse)) before the close of such taxable year.
(e) Reporting.
If the Secretary requires information reporting under section 6045 by a person described in subsection (e)(2) thereof to verify the eligibility of taxpayers for the credit allowable by this section, the exception provided by section 6045(e) shall not apply.
(f) Recapture of credit.
(1) In general.
Except as otherwise provided in this subsection , if a credit under subsection (a) is allowed to a taxpayer, the tax imposed by this chapter shall be increased by 62/3 percent of the amount of such credit for each taxable year in the recapture period.
(2) Acceleration of recapture.
If a taxpayer disposes of the principal residence with respect to which a credit was allowed under subsection (a) (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer’s spouse)) before the end of the recapture period—
(A) the tax imposed by this chapter for the taxable year of such disposition or cessation shall be increased by the excess of the amount of the credit allowed over the amounts of tax imposed by paragraph (1) for preceding taxable years, and
(B) paragraph (1) shall not apply with respect to such credit for such taxable year or any subsequent taxable year.
(3) Limitation based on gain.
In the case of the sale of the principal residence to a person who is not related to the taxpayer, the increase in tax determined under paragraph (2) shall not exceed the amount of gain (if any) on such sale. Solely for purposes of the preceding sentence, the adjusted basis of such residence shall be reduced by the amount of the credit allowed under subsection (a) to the extent not previously recaptured under paragraph (1) .
(4) Exceptions.
(A) Death of taxpayer. Paragraphs (1) and (2) shall not apply to any taxable year ending after the date of the taxpayer’s death.
(B) Involuntary conversion. Paragraph (2) shall not apply in the case of a residence which is compulsorily or involuntarily converted (within the meaning of section 1033(a) ) if the taxpayer acquires a new principal residence during the 2-year period beginning on the date of the disposition or cessation referred to in paragraph (2) . Paragraph (2) shall apply to such new principal residence during the recapture period in the same manner as if such new principal residence were the converted residence.
(C) Transfers between spouses or incident to divorce. In the case of a transfer of a residence to which section 1041(a) applies—
(i) paragraph (2) shall not apply to such transfer, and
(ii) in the case of taxable years ending after such transfer, paragraphs (1) and (2) shall apply to the transferee in the same manner as if such transferee were the transferor (and shall not apply to the transferor).
(D) Waiver of recapture for purchases in 2009. In the case of any credit allowed with respect to the purchase of a principal residence after December 31, 2008, and before December 1, 2009—
(i) paragraph (1) shall not apply, and
(ii) paragraph (2) shall apply only if the disposition or cessation described in paragraph (2) with respect to such residence occurs during the 36-month period beginning on the date of the purchase of such residence by the taxpayer.
(5) Joint returns.
In the case of a credit allowed under subsection (a) with respect to a joint return, half of such credit shall be treated as having been allowed to each individual filing such return for purposes of this subsection .
(6) Return requirement.
If the tax imposed by this chapter for the taxable year is increased under this subsection , the taxpayer shall, notwithstanding section 6012 , be required to file a return with respect to the taxes imposed under this subtitle.
(7) Recapture period.
For purposes of this subsection, the term “recapture period” means the 15 taxable years beginning with the second taxable year following the taxable year in which the purchase of the principal residence for which a credit is allowed under subsection (a) was made.
(g) Election to treat purchase in prior year.
In the case of a purchase of a principal residence after December 31, 2008, and before December 1, 2009, a taxpayer may elect to treat such purchase as made on December 31, 2008, for purposes of this section (other than subsections (c) and (f)(4)(D) ).
(h) Application of section.
This section shall only apply to a principal residence purchased by the taxpayer on or after April 9, 2008, and before December 1, 2009.

The tax code isn’t quite that linear.

Island county will continue to tank, hard. The prices stayed way over the top even after the bubble burst. Two things are going to happen, one is that high end prices can and will deteriorate in the next two years, second is that the second retirement home will be in places more reasonably priced.

Another thing that is becoming a trend is to dump speculative properties and all of Island County qualifies for that.

Those homes coming off and on will be on again at drastic price reductions.

Most people are looking at the 15th of October, but it looks like November before prices begin to decline. The big economic numbers will be coming out after the Christmas shopping season. If consumer confidence is way down you may get a bigger bang in January and February of next year.

While the credit isn’t going to get us to buy a mediocre place just to have the cash, I’m more than happy to take the handout if it’s there. Likewise, if it goes away, nothing changes for us. If another, larger, credit shows up, hooray! But it won’t be increasing our price range. I typically cut the IRS a check for about 10 – 15K in April, so it would be nice to wash that out, but that’s the extent of my plans to spend it if it happens.

We’ve made some lowball offers but haven’t got a bite yet. Out here in Island county a lot of the overpriced stuff seems to be owned by people more than willing to have their homes on and off the market for years at a time.

Request to readers – jump in, join the discussion, make it more interesting. The entertainment value of this site is starting to fade again.

Possible? yes. Probable? no.

You should reconsider that position. There’s two types of tax credits: refundable and non-refundable. Google can explain the difference to you.

I think the state wanted to tap the IRS for the credit as if it was a family related obligation, such as child support. The state can show a court order for the family support, but it much harder to show that the person did indeed qualify, and that the state should get the cash…

I Catch Your Drift

We all may be in for a “Big Obama Income Tax Increase Surprise” when the 2009 Income Tax Pubs come out….stay tuned…LOL

I gave you historical definitions of a tax credit, and remember when our state was going to “upfront” the $8000, but the feds wouldn’t allow it, said it was illegal, because the state couldn’t prove the home buyer would actually qualify for the $8K…..

Also don’t believe those publications. A good tax person knows the law, rather than the IRS’s interpretation given through a very limited publication. The IRS reduces many pages of code down to a few paragraphs…

Also a good tax planner can structure transactions to maximize tax avoidance, otherwise known as legally minimizing taxes, yet keeping the substance of the deal the same.

That so-called “tax credit” is really just a shift in tax liability timing, rather than a true credit, but I suppose we are getting to semantics here.

Remember that first housing “credit” that was a “refund” but needed to be paid back, interest free, over 15 years beginning in 2010.

That’s not really much of a credit or a refund, and some buyers are starting to figure that out!

I Do My Own Income Taxes Kary

IRS definition of a tax credit, states in part:

“…A tax credit is a direct reduction in the tax liability of the taxpayer receiving the
credit….”….”Most individual tax credits are nonrefundable (Pub. 17, page 243): if the
amount of the credit exceeds the tax liability, the taxpayer is not entitled to a refund of
the excess….”

The rest of the URL:

http://www.acatcredentials.org/pdf/07IncomeTaxCredits.pdf

It is a silver lining per Pub 17.

All the car had to do was move under its own power. There was no lengthy test, and it could die the moment after being traded.

How many had repairs made? More like how many dealers accepted cars that didn’t actually qualify knowing that once crushed it didn’t make much difference?

Mine did drive. I’ll upload some photos of what I traded in, and you will get an idea of just how good of a deal I got!

I would have purchased two if CFC would have allowed it.

I wonder how many cars had $400-500 of repairs done just so they would run and qualify for CFC?

Q. I don’t owe taxes and/or my income is exempt from tax and I do not have a filing requirement. Do I qualify for the credit?

A. The credit is fully refundable and, if you qualify as a first-time homebuyer, having tax-exempt income will not preclude eligibility. Although there are maximum income limits for qualifying first-time homebuyers, there are no minimum income criteria. Thus, someone with no taxable income who qualifies as a first-time homebuyer may file for the sole purpose of claiming the credit for a refund.

Q. When is a “refund” not really a refund?
A. When the government is hellbent on handing out free money in a desperate attempt to reinvigorate a massive nationwide Ponzi scheme.

I Was Talking to an Attorney About the CFC this Week

She wasn’t interested in it like myself, her Miata and my Classic both went for about $20-22K base new and we both had way under 100K on the odometer(s) and both our cars run like tops…..why in Hades would either of us want to drive a new $20-22K car off the lot to save $4500 [subtract less the actual value of the trade in]; to lose about $4500 just driving it off the lot [unless you get that 60 day GM return guarentee]….LOL

Makes absolutely no sense to both of us.

I feel your pain. Wife and I have been renting since ‘05.

Having been fairly obssesed with this real estate crisis the past few years, I can say with confidence that prices are not done falling in Seattle.

If you are going to buy, make sure you buy a Bank Owned Property. They are cheaper, and banks are more willing to negotiate dramatically.

There’s a Silver Lining Tim

You have to pay $8000 in income taxes to get $8000 in credit…..I imagine a lion’s share of the marginally qualified FHA candidates with low FICO scores didn’t pay near that much in income tax…LOL

I’m not certain, but I don’t think that’s correct. This is a credit where you don’t have to have had the tax liability. Rather unusual, to say the least.

Not precisely clear, but this link indicates decreases tax bill or refund.

http://www.irs.gov/newsroom/article/0,,id=204671,00.html

You have to pay $8000 in income taxes to get $8000 in credit…..I imagine a lion’s share of the marginally qualified FHA candidates with low FICO scores didn’t pay near that much in income tax…LOL

I have made it clear that I traded in my ‘clunker’ under the CFC program. Do I feel guilty? No! I’d feel worse if I still had my old clunker. Yet I still have and drive my other clunker…

By sf_boomerang @ 1:

“Okay first off, let’s drop the nonsense notion that somehow propping up home prices will “combat persistent high unemployment.” That’s a complete non sequitur.”

Oh, Tim, don’t be silly. Of course it combats persistent high unemployment.

Y’know… among Realtors.

I’m not sure why Tim doesn’t see it. Part of that might be that it’s not the propping up of prices that helps unemployment, it’s the volume. Housing sales create a lot of other transactions, and if people get $8,000 after closing, more such transactions will be created than would be otherwise. HD, furniture companies, etc., would be the major beneficiaries. That does create jobs.

But doesn’t that create jobs in other countries as opposed to here since 80% of what you suggested comes from China or other parts of Asia? So it adds to a deficit in our country so we can sell our debt to China until eventually they own more than 50% of our country? At most I think it might slow unemployment from gaining by keeping people in the shipping, retail industries in thier jobs longer but I don’t think it will create jobs as they described when it was passed. I may not understand what you meant? That to me is using the government like a credit card to buy stuff you don’t need and just want. Let me know if I read your comment wrong.

Kary, I think you miss Tim’s point that this transactional volume doesn’t result in “productive work” being done, in the sense that it helps the portion of our GDP that we could possibly help our trade, or budget deficits. I know that everyone is doing work, but what the country actually needs is work that creates “widgets” that people *outside* our country value.

A little less avantagarde approach would be to implement lower federal income taxes for at least 5 years. It’s a fair way to increase sustainable, healthy spending. Giving people incentives, like if you hire this person or buy this product you will get some money is not sustainable or healthy. Lower income tax for 1-year would make me put the bulk of the money into the bank. A 5-year period would make me increase my spending, no doubt.