Stimulating First-Time Homebuyer Program Helps More Buyers Enter Market
In case you did not hear the good news, the American Recovery And Reinvestment Act of 2009 (which President Obama signed into law last week) included significant improvements to the temporary First-Time Homebuyer Tax Credit. While many might view this as a great benefit aimed only at the first-time homebuyer, the reality is that it will help stabilize the housing market by bringing more buyers into an inventory-laden problem in need of more demand.
This program is so important that we have created a simple summary page that you can visit for a comprehensive summary of the First-Time Homebuyer Federal Tax Credit. Below is a brief summary of the new program benefits and qualifications.
Changes To The First-Time Homebuyer Federal Income Tax Credit
- Amount of Credit: The First-Time Homebuyer Federal Income Tax Credit, as modified in the American Recovery and Reinvestment Act voted into law in February 2009 allows for a tax credit in the amount of 10% of the cost of the home, up to $8,000.
- Eligible Property: Any single-family residence (including a condo, co-op, or townhouse) may be an eligible property under the homebuyer income tax credit, provided it will be used as the homebuyer's principal residence.
- Refundable: This homebuyer income tax credit reduces income tax liability. The $8,000 tax credit is a clean refundable credit, unlike the one that was passed last summer, which required a repayment. If you qualify as a first-time buyer (i.e., haven't been a homeowner in the past 3 years), then you can claim the $8,000 to reduce your tax burden. If the $8,000 is greater than the tax you owe, then you will get a refund check for the difference. Example: you owe $2,000 in taxes on April 15, 2010. But if you bought a home before the stimulus expiration on Dec. 1, 2009, then you will get a tax refund check for $6,000 from the IRS.
- Income Limit: In order to be eligible for the homebuyer income tax credit in full, the homebuyer can have an annual adjusted gross income of no more than $75,000 ($150,000 on a joint return). A homebuyer with an annual adjusted gross income above that level and up to $95,000 ($170,000 on a joint return) is eligible for a reduced tax credit.
- First-Time Homebuyer Defined: The homebuyer income tax credit is designed for first-time homebuyers, which means the homebuyer (and/or the homebuyer's spouse) can not have owned a principal residence in the 3 years prior to purchase of the eligible property.
- Revenue Bond Financing: A homebuyer who utilizes revenue bond financing may be eligible for the homebuyer income tax credit.
- Repayment: There is no repayment of the homebuyer income tax credit by the homebuyer.
- Recapture: If the eligible property is resold within three years of purchase, the entire amount of homebuyer income tax credit is recaptured on the sale.
- Effective Date: The First-Time Homebuyer Federal Income Tax Credit is effective for purchases on or after January 1, 2009 and before December 1, 2009. This guide reflects a modification from the First-Time Homebuyer Federal Income Tax Credit, which remains in effect for homes purchased by eligible homebuyers between April 9, 2008 and Dec. 31, 2008.
Remember, I am just a real estate blogger, passing on good news as best I can. You should seek advice from a professional tax advisor for specific tax calculations and timing for claiming the tax credit. Also, you can always visit our new information page for a more in-depth summary of the First-Time Homebuyer Progam.
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