What Was the Longtime Homebuyer Tax Credit?
The longtime homebuyer tax credit went by another name as well—the "first-time homebuyers tax credit." This credit (now defunct) was extended to long-time residents of the same main home in addition to first-time homebuyers. The longtime homebuyer (or first-time homebuyers) tax credit was a federal income tax credit available to homebuyers who had owned and lived in the same principal residence for five of the last eight years before the purchase of their next home.
In order to qualify for the credit, most homebuyers would have had to sign a binding sales contract for the home before April 30, 2010, and close on the purchase before June 30, 2010.
- The longtime homebuyer tax credit was a federal income tax credit available to homebuyers who had owned and lived in the same principal residence for five of the last eight years before purchasing their next home.
- The tax credit was available to homebuyers who signed a contract before April 30, 2010, and closed on the home before June 30, 2010.
- The purpose of the longtime homebuyer tax credit was to bring buyers to the housing market alongside other tax credits, such as the first-time homebuyer tax credit.
- The government introduced these tax credits to bring stability to the housing market experiencing falling home prices during the Great Recession.
- Depending on the circumstances, a homebuyer received a tax credit of 10% of the home's purchase price, maxed at between $6,500 and $8,000.
- The longtime homebuyer tax credit was also called the first-time homebuyers tax credit.
Tax Deductions Vs. Tax Credits
Understanding the Longtime Homebuyer Tax Credit
The longtime homebuyer tax credit was enacted by the government alongside other similar homebuyer tax credits, including the first-time homebuyer tax credit, to bring new buyers to the housing market. The government hoped the credits would increase demand and stabilize falling housing prices. By most accounts, the credits were successful in increasing home sales and median prices. Critics of the tax credit believe that this subsidy artificially inflated home prices and acted as only temporary support for falling prices.
The first-time homebuyer tax credit was a refundable tax credit made available to Americans purchasing their first home. The credit originally applied to home purchases made by qualified first-time buyers between April 9, 2008, and July 1, 2009. However, the Obama administration extended the original time frame requiring homeowners to have a signed sales contract until May 1, 2010, and gave them until the end of June 2010, to close the transaction.
The original tax credit implemented a credit of 10% of the home's purchase price, up to $7,500, which had to be repaid over 15 years in equal installments. However, the expanded version of the tax credit increased the maximum to $8,000 and removed the repayment requirement altogether, as long as the buyer stayed in the home for at least three years.
Beginning Nov. 7, 2009, long-time residents who owned their own homes also became eligible for the credit. The maximum credit for this group was $6,500, which, with some exceptions, did not have to be repaid. Long-time homeowners who bought a replacement home after Nov. 6, 2009, or in early 2010 may have been eligible to qualify for a credit of up to $6,500 under the rules.
Under a special rule, long-time homeowners who bought a replacement home after Nov. 6, 2009, or in early 2010 may have qualified as well. 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.
If two people were buying a home together but were not married, the tax credit would only count for one individual. For example, both individuals would not be able to receive a tax credit of $6,500 for a total amount of $13,000. The tax credit for the home purchase would still just be $6,500. The credit, however, was meant to be split amongst all buyers. In addition, being a cosigner on another property did not preclude an individual from benefiting from the tax credit when they were able to make their own home purchase.
Though the longtime homebuyer tax credit has expired, there are other federal programs in place where homebuyers can benefit from tax credits. The Biden administration has also introduced a new tax credit bill for first-time homebuyers for up to 10% of the home's purchase price with a cap of $15,000.