First Time Homebuyers and the new TAX Credit - Explained

By
Real Estate Agent with Berkshire Hathaway HomeServices Abbott Realtors

Believe it or not --- there is alot to be happy about in the real estate market.

First, real estate is local and in our area --- prices have adjusted and we are beginning to see signs of activity. Showings have increased over the same time last year. Second, interest rates are at an all time LOW. Buyer's that have good credit ( and I am working with a few ) are getting a terrific rate and they are getting loans. Next, first time home buyers can be happy about the newly crafted TAX CREDIT. With the help of our local mls board, I have tried to outline the details below:

About the Tax Credit  - Two Stages
On July 30, 2008, the Federal Government passed the Housing and Economic RecoveryAct (H.R. 3221). That legislation contains a provision that enables any individual or household that hasn't owned a home for at least three years to take up to a $7,500 tax credit if they purchased their home after April 9, 2008 and before December 31, 2008.


On February 17, 2009, President Barack Obama signed into law H.R. 1, the American Recovery and Reinvestment Act of 2009. Included in that legislation are modifications to the Homebuyer Tax Credit passed in July. First-time homebuyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009 can now take up to an $8,000 tax credit, reducing their income tax liability.


Who is Eligible
Any individual or household that hasn't owned a home for at least three years is eligible.The home must be a single-family unit (house, condo, co-op), a primary residence and be located in the United States. Income limits are $75,000 for individuals and $150,000 for households. Individuals whose income exceeds the $75,000 limit but isn't more than $95,000 can still take the credit, but on a reduced basis. The same applies to households earning up to $150,000.


How it Works - 2008 First-Time Buyers
The actual credit amount is equal to 10 percent of the home purchase amount, up to a maximum of $7,500. First-time buyers who meet the above criteria and who purchased their home on or after April 9, 2008 are eligible for the deduction on their 2008 tax return. First-time buyers who purchase their home in 2009 can claim the deduction on their 2009 tax return, provided the purchase is made prior to July 1, 2009. Authorization for the credit expires on July 1, 2009.


Paying it Back
To help keep the program cost-effective for taxpayers, the federal government requires the tax credit to be paid back in small, 6.67 percent increments over 15 years. For that reason, some analysts have likened the credit to a 15-year, interest free loan to help make home buying more affordable.


How it Works - 2009 First-Time Buyers
The actual credit amount is equal to 10 percent of the home purchase amount, up to a maximum of $8,000. First-time buyers who meet the above criteria and who purchased their home on or after January 1, 2009 are eligible for the deduction on their 2009 tax return, provided the purchase is made prior to December 1, 2009.   Authorization for the credit expires on December 1, 2009. The new legislation does not require first-time buyers to pay the credit back. However, the full credit amount is recovered at the time sale if the home is sold within 3 years.

Now it is best to check with your real estate attorney, your accountant and your real estate agent --- to make sure that you qualify and to keep up with the changing laws. These changes will enable buyers to get more for their money both from reduced interest rates, reduced home prices AND the new tax credit. First time home buyers have a lot to be happy about!

For more information see:

www.recovery.gov

www.whitehouse.gov

www.itsagoodtime.com

www.irs.gov/newsroom

Or contact me at CupaT@aol.com or 201.675.1618 for more local information and assistance.

Comments (2)

Sandy Shores FL RealtorĀ®, Melbourne Real Estate
M & M Realty of Brevard Inc. - Melbourne, FL
Brevard County Real Estate, Florida's Space Coast

Hi Pamela, There is a lot to be happy about in the real estate market. Our market is showing increased activity also.  Things are looking good.

Mar 05, 2009 02:31 AM
Pamela STETSON
Berkshire Hathaway HomeServices Abbott Realtors - Mahwah, NJ
I would love to help you buy or sell your home!

Thanks for reading and for your note. I think we will be out of the woods this spring --- once we see the stock market ( have it's bear rally ) in March...Keep your fingers crossed!

Mar 06, 2009 08:14 AM