The Details of The First-Time Homebuyer Tax Credit

Posted 02/17/2009 - 21:13 by Emily Schuyler

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President Obama was in Denver today to sign the newly passed “American Recovery and Reinvestment Act of 2009.” There are a few changes to this first-time homebuyer tax credit. Previously, it was a maximum of $7,500 and it needed to be paid back. Now, it is a maximum of $8,000 and does not need to be paid back as long as the homeowner owns the house for at least 3 years. To be eligible for the $8,000 tax credit, homebuyers must have purchased a home after Jan. 1, 2009, and before Dec. 1, 2009.

To help better understand the benefits of this first-time homebuyer tax credit, I have included a chart from The National Association of REALTORS below:

FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act
Major Modifications Italicized
February 2009

 

FEATURE CREDIT AS CREATED JULY 2008 APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9,2008 REVISED CREDIT EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009
Amount of Credit Lesser of 10 percent of cost of home or $7500 Maximum credit amount
increased to $8000
Eligible Property Any single family residence (including condos, co-ops, townhouses) that will
be used as a principal residence.		 No change
All principal residences eligible.
Refundable Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser. No change
Purchasers will continue to
receive refund for unused amount when tax return is filed.
Income Limit Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000). No change
Same income limits continue to apply.
First-time Homebuyer Yes, Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years  previous to purchase. No change
Still available for first-time
purchasers only. Three-year rule continues to apply.
Revenue Bond Financing No credit allowed if home financed with state/local bond funding. Purchasers who utilize revenue bond financing can use credit.
Repayment Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing. No repayment for purchases on
or after January 1, 2009 and before December 1, 2009
Recapture If home sold before 15-year repayment period ends, then outstanding balance
of repayment amount recaptured on sale.		 If home is sold within three years
of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.
Termination July 1, 2009
(But note program changes for 2009)		 December 1, 2009
Effective Date Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year. All revisions are effective as of
January 1, 2009

 

 

-Emily Schuyler, e-PRO

Smart Click Realty