Ask The Taxgirl: Amount Of Homebuyer’s Credit

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.

Kelly Phillips Erb

Kelly Phillips Erb, known as Taxgirl, is a tax attorney, writer, and speaker who explains tax news, IRS updates, scams, financial crime, and money in plain English.

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