First-Time Homebuyer Tax Credit

Here is some interesting information concerning the FIRST-TIME HOMEBUYER TAX CREDIT as modified in the American Recovery and Reinvestment Act enacted in February 2009.

The amount of credit as created July 2008 that applies to all qualified purchases on or after April 9, 2008 is the lesser of 10% of the cost of the home or $7,500. The revised credit – effective for purchases on or after January 1, 2009 and before December 1, 2009 is increased to $8,000.

There have been no changes in eligible single family property which includes houses, condos, co-ops, and townhouses used as a principal residence.

Purchasers will continue to receive refund for unused amount of tax credit when tax return is filed reducing the income tax liability for the year of purchase.

The same income limits continue to apply for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). This phases out above those caps ($95,000 and $170,000).

No change for first-time buyers (and their spouse’s). Purchasers may not have owned a principal residence in 3 years previous to purchase.

While no credit was allowed if home was financed with state/local bond funding between April 9, 2008 and January 1, 2009, after January 1, 2009 purchasers who use bond financing can use credit.

While 6.67% of credit or $500 is to be repaid each year for 15 years starting with 2010 tax filing for properties bought between April 9, 2008 and January 1, 2009, there is no payment for purchases on or after January 1, 2009 and before December 1, 2009.

Prior to enactment of the American Recovery and Reinvestment Act, if a home sold before the 15-year repayment period ends, the outstanding balance of repayment amount is recaptured on sale. After enactment, if the home is sold within three years of purchase, the entire amount of credit is recaptured on sale. This applies only to homes purchased in 2009.

Prior to enactment the termination date was July 1, 2009 (but you should not changes for 209). The termination date after enactment is December 1, 2009.

On purchases on or after April 9, 2008 and before January 1, 2009, repayment is to begin for in the 2010 tax year. All revisions are effective as of January 1, 2009.