As an update to a previous post, details are now in on the First Time Home Buyer Credit in the Economic Stimulus Bill (formally called The American Recovery and Reinvestment Act of 2009). The bill was signed into law on Tuesday, February 17th.
Here’s an overview of the provisions in the bill that will benefit First Time Home Buyers:
· The tax credit is for first-time home buyers only. A First-Time Home Buyer is defined as someone who has not owned or lived in a principle residence within the past three years.
· The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000. (ex: Home purchase price $300,000 x 10%= $30,000 Max Tax Credit = $8,000)
· The tax credit does not have to be repaid. (unlike the previous credit enacted in 2008)
· There is a limited window of opportunity. The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
· The tax credit is income qualified so is subject to income limitations: single taxpayers will need an adjusted gross income of up to $75,000 for the full credit. Married couples with incomes up to $150,000 qualify. Those earning more than these limits may qualify for a reduced credit.
· The tax credit is “refundable”, meaning even if you have little tax liability and don’t itemize deductions when filing your tax return, a qualified first time home buyer can still take advantage of the credit.
· You will have to own the home for at least three years to capitalize on the credit. Should you sell the home before three years, with the exceptions of death or divorce, there is a ‘Recapture’ provision where you would have to return a portion of the credit back to the government.
A note for those first time home buyers who purchased a home prior to Jan 1st, 2009… this bill is not retroactive. It seems that this bill is to encourage those who have been thinking of purchasing a home to get off the fence to help spur the economy.
However, if you did purchase a home as a first time buyer between April 9, 2008 and December 31, 2008 you may qualify for the $7,500 tax credit and claim this credit on this year’s tax return.
A good source for FAQ explanations is http://www.federalhousingtaxcredit.com/2009/faq.php
I encourage you to explore Item 19 especially. This is an interesting strategy for someone planning to purchase their first home this year and how you can take advantage of this tax credit without having to wait till the 2009 tax returns are filed.
I am an instructor of Washington State Housing Finance Commission sponsored First-Time Home Buyer classes, and will be conducting a class on the evenings of Tuesday, March 10th and Thursday, March 12th. View a schedule of all the sponsored classes at www.wshfc.org
Complete details of the bill: http://www.whitehouse.gov/the_press_office/ARRA_public_review/
The White House opened a website to provide some transparency as to where the money is being spent: http://www.recovery.gov/