When Uncle Sam pushed the 2008 homebuyer’s tax credit that offered first-time buyers rebates to the tune of $7,500, new homeowners weren’t complaining. But that was then, and this is now. The 2010 tax season is as an unpleasant reminder for those homeowners that they might get a $500 tax bill come April 15.
The good news is that there are some exceptions. The bad news is that if you don’t qualify for those exceptions, the Internal Revenue Service fully expects you to pay up the amount of that tax credit you took three years ago.
Pure and simple (though nothing with the IRS is ever simple), the $7,500 homebuyer’s tax credit was an interest-free loan from the federal government to new homeowners. The idea was to light a fire under the tepid U.S. housing market by getting more buyers to sign mortgage deals.
By most estimates, the homebuyer tax credit did get more people into homes – for the short term, at least.
Payouts from the tax credit totaled approximately $23 billion, according to a 2010 study from FNC, an Oxford, Miss.-based real estate analytic firm. The FNC’s data showed that the tax credit stabilized housing prices in “most states” and successfully reinvigorated the U.S. housing market.
"Between July 2008 and June 2010, the First Time Home Buyer's program induced an estimated 10.1% abnormal, or above-trend, growth in home prices," says Robert Dorsey, chief data and analytics officer.
"The result of this tax credit stimulus was modest home price stabilization which lasted through June," Dorsey continues. "In other words, if Congress had not approved the First Time Home Buyer's Tax Credit, home prices would be 10% lower than they are now and falling rather than stable and slowly rising."