Taxpayer asks:
Hi Taxgirl,
[I emailed you last week when we received the refund to our amended return for 2008 because we claimed the new homebuyers $8000 credit. I was perplexed that it was for $7978 instead of for $8000. The following info explains why, and continues my question.]
We just received a letter from the IRS explaining the “change” to our account regarding the amended return we filed in order to claim the recently enacted $8000 new homebuyers credit.
Apparently, it is not the kind of “credit” I am used to understanding. The letter from the IRS said:
How We Changed Your Account
Account balance before this change — None
Increase in tax because of this change — $22.00
Credit added other — $8,000.00 CR
Amount to be refunded to you — $7,978.00
—————————————–
Apparently we somehow owed MORE tax because we took a CREDIT? I don’t see how this is possible. Do you have any suggestions to help us understand this?
Thanks, Taxgirl! You’re the best,
Perplexed
Taxgirl says:
That certainly is perplexing! I don’t know what happened since I don’t have the luxury of sorting through the papers but read on for my best guess.
The first option is that the house didn’t cost enough. The credit is 10% of the purchase price of the home, with a maximum available credit of $8,000 for a single taxpayer or a married couple filing a joint return. That puts the threshold for the credit at $80,000 for a purchase price. In today’s market, I’m guessing that doesn’t happen very often.
Which brings us to the other reason why you wouldn’t collect the entire amount: phase-outs. The credit is phased out based on your modified adjusted gross income (MAGI). For a married couple filing a joint return, the phase-out begins at $150,000 and runs the scale up to $170,000. For single taxpayers (or MFS), the phase-out begins at $75,000 and runs to $95,000.
If your MAGI was just over $150,000, you wouldn’t receive the entire credit. I’m guessing that you were maybe slightly over…?
But that’s just my best guess. If you have specific questions – and you have a few minutes to spare on the phone – you can always call the IRS and ask what happened. Call 1.800.829.1040.
Do you have any advice for how SELLERS should best take advantage of the credit? Should we advertise about the credit with our real estate listings?
That’s a great question! I’m going to make it a separate “ask the taxgirl” – stay tuned!
I had a similar issue with an increase in tax for $165. Did anyone ever solve this mystery? I keep getting the run around with the IRS.
The best guesses don’t fit our situation.