In an effort to encourage first-time home buyers to jump off the fence and begin looking for a home, the recently passed “American Recovery and Reinvestment Act of 2009” made some changes to the tax credit for this group. The bill, which was signed into law yesterday, gives a maximum $8,000 tax credit to first-time home buyers when they purchase a home as their principal residence on or after January 1, 2009 and before December 1, 2009.
This is a true tax credit in that it does not have to be repaid unless the owners sell before three years. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser. This chart by the National Association of REALTORS®, Major Modifications to Tax Credit shows the difference between the earlier credit and the current one.
It's understood that people who have never bought a home are eligible for this incentive. What you may not realize is that anyone who has not owned a home for the past three years is also considered a first-time home buyer and also qualifies for this tax credit when they buy a home this year. Who do you know that falls into this category - you? an adult child who has returned home? someone who divorced 3 years ago and is renting? If you know anyone who would qualify as a first-time home buyer, please let them know about this tax credit. It could mean the difference between staying where they are now and owning their own home.
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