Note: This is intended to provide an overview only – for
specific information or individual concerns, please contact
your lawyer, accountant and/or financial advisor.
Congress has recently passed a federal income tax credit for
first-time homebuyers that is the lesser of either 10% of
the home’s cost or $8,000.
This will be available to qualified first-time home buyers
for the purchase of a principal residence between January 1,
2009 and before December 1, 2009.
For example:
The tax credit is available for first-time
homebuyers or those who have not owned in the last three
years.
The credit does not require repayment (unlike the
2008 iteration of the credit). 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.
If the home is sold within three years of purchase,
the entire amount of credit is recaptured on sale.
This measure can help to significantly lower housing
inventory, bring stability to home values and move the
country closer to economic recovery. Many industry experts
have said that the tax credit for first time homebuyers
could result in up to 300,000 additional home purchases each
year. The following chart provides more information:
FEATURE
FIRST-TIME HOMEBUYER FEDERAL INCOME TAX CREDIT:
EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1,
2009 AND BEFORE DECEMBER 1, 2009
Amount of Credit
The amount of the homebuyer federal income tax
credit is the lesser of 10% of the cost of the
home bought or $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 Only
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
However, 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.
