The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1.
This means that first-time homebuyers have just under 12 weeks to find and close on a home to qualify for the $8,000 federal tax credit by Nov. 30 - before the Dec. 1st deadline.
Those just beginning the process will have to beat the average time it takes to buy a home, a challenge that real estate professionals can help buyers meet even though it's taking longer today to close most transactions today.
Foster & Probert would like to take this opportunity to provide our current and potential clients with more information on this topic. Below are some answers to some of the most frequently asked questions regarding this new tax credit. These answers are for general use only and can, in no way, replace the advice of a professional attorney, accountant, or knowledgeable real estate agent/broker. If you have specific questions, please contact us with your concerns.
Q. Who qualifies for this credit?
A. First-time home buyers who purchase homes between January 1, 2009 and December 1, 2009. To qualify as a "first-time home buyer" the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
Q. Which Properties Are Eligible?
A. The 2009 First-Time Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
Q. How Much Will the Credit Be?
A. The maximum allowable credit for home buyers is $8,000. Each home buyer's tax credit is determined by two factors:
1. The price of the home - the credit is equal to 10% of the purchase price of the home, up to $8,000.
2. The buyer's income - single buyers with incomes up to $75,000 and married couples with incomes up to $150,000 - may receive the maximum tax credit.
Q. If the Buyer(s)' income exceeds these limits, can he/she still get a credit?
A. Yes, some buyers may still be eligible for the credit.
The credit decreases for buyers who earn between $75,000 and $95,000 for single buyers and between $150,000 and $170,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income-over $95,000 for singles and over $170,000 for couples are not eligible for the credit.
Q. I plan to build a home and occupy it in 2009. Can I claim the first-time homebuyer credit now and use the funds toward the down payment or other ongoing construction costs?
A. No. To qualify for the first time home buyer credit, the residence must be purchased. By statute, a residence which is constructed by the taxpayer is treated as purchased on the date the taxpayer first occupies the residence.
Q. I am in the process of buying a home. I expect to close the deal before December 1, 2009. Can I claim the first-time homebuyer credit now? That would allow me to use the refund for a down payment.
A. No. You may not claim the credit in anticipation of a purchase that has yet to happen. Until you have finalized the purchase of your home, which for most purchasers occurs at the time of the closing, you do not qualify for the credit.
Q: When must I pay back the credit for the home I purchased in 2009?
A: Generally, there is no requirement to pay back the credit for a principal residence purchased in 2009. The obligation to repay the credit on a home purchased in 2009 arises only if the home ceases to be your principal residence within 36 months from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence.
Q. Suppose a member of the military who purchased a home and qualified for the credit receives orders to deploy overseas for possibly 18 months. If they sell the home within 3 years from the date of purchase, do they have to pay back the credit?
A. Section 36 does not provide any recapture exceptions for military personnel who are deployed and sell their home within 36 months from the purchase date. If the taxpayer does not sell the residence, then the military deployment may be considered a "temporary absence" and the home may still be the taxpayer's principal residence if the taxpayer intends to return to the residence after the deployment.
The Foster-Probert team hopes that you have found this information to be helpful and look forward to being of service in your quest to purchase a new home.