First Time Home Buyers Credit

By
Real Estate Agent with Chelsea Stevens Marketing

Alright, I'm getting a little off track here, but this still fits in with my First Time Home Buyer theme I've got going. In case you had not heard, there has been a first time home buyer tax credit available for home purchases by July 1st of 2009, for a credit of up to $7,500(10% of the purchase price) that would be repayed by the borrower for the next 15 years. Basically it was an interest free loan. As of Friday the House and the Senate passed the stimulus package, and I gotta say, I wish I were a first time home buyer now.
Straight from National Association of Realtors here is a graph that illustrates the changes:

FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act
Major Modifications Bolded
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 Only 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



You can download the graph here: Government Affairs Tax Credit Chart

I'm a Realtor, not a tax person, if you have any questions, contact your tax professional.

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