As you may have heard, significant improvements in the temporary First-Time Homebuyer Tax Credit were signed into law on Feb. 17 as part of the American Recovery and Reinvestment Act of 2009 to provide a housing stimulus for first-time home purchases that occur between Jan. 1 and Dec. 1, 2009.
This is even better news for first-time homebuyers than the tax credit announced in April 2008 because not only has the tax credit maximum increased from $7,500 to $8,000 – but more significantly – it does not need to be repaid unless the individual re-sells the home within three years.
There are several notable points about this federal income tax credit that I have bulleted for your convenience so you can easily explain the highlights to potential first-time homebuyers.
• Credit maximum was increased from $7,500 to $8,000. The credit is calculated as 10% of the purchase price. Example: If the purchase price is $70,000, the credit is $7,000.
• Removed the repayment requirement, provided the homebuyer does not resell the home for three years.
• Eligibility remains for first-time homebuyers only. In this case, a first-time homebuyer is defined as an individual who has not owned a primary home at any time during the three years prior to purchase, but who may have done so prior to that time. Although certain income limits do apply, the amount of the credit is the same for all taxpayers, married or single.
• To be eligible for the full tax credit, 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.
• The tax credit can be claimed on one’s individual or joint tax return for the purchase of any single-family home between Jan. 1, 2009 and Dec. 1, 2009. It can be claimed on a 2008 tax return (to be filed by April 15, 2009), an amended 2008 tax return, or a 2009 tax return. Individuals should consult a professional tax advisor for exact tax calculations and timing.
Are you a First Time homebuyer looking for a new home? Contact me for more details!