Longtime Homebuyer Tax Credit

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Longtime Homebuyer Tax Credit

What Was the Longtime Homebuyer Tax Credit?

The long-standing homeowner tax credit was also known as the “first-time homebuyers tax credit.” This (now-defunct) credit was available to both long-term occupants of the same primary residence and first-time purchasers. The longtime homeowner (or first-time homebuyer) tax credit was a federal income tax benefit granted to homebuyers who had owned and lived in the same primary dwelling for the previous five of the previous eight years prior to the acquisition of their next home.

Most purchasers would have required to execute a binding sales contract for the house by April 30, 2010, and close on the transaction before June 30, 2010. 1

Key Takeaways

  • The longtime homebuyer tax credit was a federal income tax benefit provided to homebuyers who had owned and resided in the same primary dwelling for the previous five of the previous eight years prior to acquiring their next home.
  • Homebuyers who signed a contract before April 30, 2010, and closed on the house before June 30, 2010, qualified for the tax benefit.
  • The longterm homebuyer tax credit was designed to encourage purchasers to enter the housing market alongside other tax breaks, such as the first-time homebuyer tax credit.
  • The government enacted these tax breaks to help stabilize the housing market, which was suffering decreasing property values during the Great Recession.
  • Depending on the conditions, a homeowner might obtain a tax credit of 10% of the purchase price, up to a maximum of $6,500 to $8,000.
  • The first-time homebuyer tax credit was also known as the long-term homebuyer tax credit.
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Tax Deductions Vs. Tax Credits

Understanding the Longtime Homebuyer Tax Credit

The government created the longterm homebuyer tax credit, along with other comparable homebuyer tax credits, such as the first-time homebuyer tax credit, to attract new purchasers to the housing market. 1 The government thought that the incentives would boost demand and help to stabilize sliding house prices. According to most reports, the incentives were effective in raising house sales and median prices. Critics of the tax credit argue that it artificially boosted housing prices and provided only temporary relief for dropping prices. 2

The first-time homebuyer tax credit was a refundable tax credit offered to Americans buying their first house. The credit was initially available for qualifying first-time buyers who purchased a property between April 9, 2008, and July 1, 2009. The Obama administration, on the other hand, extended the initial deadline for homeowners to have a signed sales contract until May 1, 2010, and allowed them until the end of June 2010 to consummate the deal. 34

The initial tax credit provided a credit of 10% of the home’s purchase price, up to $7,500, which had to be returned in equal payments over 15 years. 5 The extended version of the tax credit, on the other hand, boosted the maximum to $8,000 and eliminated the payback obligation entirely, as long as the buyer lived in the property for at least three years.

Long-term residents who owned their own houses were eligible for the credit on November 7, 2009. The maximum credit for this group was $6,500, which, with some exceptions, did not have to be repaid. Long-term homeowners who purchased a replacement house after November 6, 2009, or in early 2010, may have qualified for a credit of up to $6,500 under the guidelines. 6

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Special Considerations

Long-term homeowners who purchased a replacement house after November 6, 2009, or in early 2010, may also have qualified under a unique regulation. To qualify as a long-time resident, taxpayers must have owned and used the same home as their principal residence for at least five consecutive years during a specified eight-year period. 1

If two people bought a house together but were not married, the tax credit would only apply to one of them. For example, both persons would be unable to claim a $6,500 tax credit for a total of $13,000. The tax credit for a house purchase would remain at $6,500. The credit, on the other hand, was intended to be shared by all purchasers. Furthermore, being a cosigner on another property did not stop a person from receiving the tax credit when they were able to buy their own house.

Though the long-standing homebuyer tax credit has expired, there are other government programs in existence through which homeowners might get tax breaks. The Biden administration has also sponsored a new tax credit measure for first-time homeowners, with a ceiling of $15,000 for up to 10% of the home’s purchase price. 7

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