First-Time Homebuyer Credit Explained

There Is a First Time For Everything

As every news station in the nation told you already, the “American Recovery and Reinvestment Act of 2009″ passed the House and the Senate on February 13th, 2009 and was signed into law by the President on February 17th, 2009. The $787 billion dollar (before interest) package among other things includes a revision of the 2008 stimulus package first-time home buyer credit. There have been a lot of proposals and changes while shaping the bill, so here is my interpretation as to what the final word on that is. Please note, that I am not a tax advisor, nor a CPA, so you should consult yours instead of going by what I say, this is just a reference. Also, as always, these opinions are that of my own and do not reflect any institution, organization or affiliation that I am a part of.

So out of the 1,071 pages of the stimulus package I found the excerpt about what changes were made to the original First-Time Homebuyer Credit, so here is the final verdict:

Sum It Up

Maximum Credit Amount: 10% of sale price or $8,000, which ever is less.

Definition of “First-time Homebuyer”: An individual (or if married, such individual’s spouse) had no ownership interest in a principal residence in the past 3 years. In laymen’s terms, someone, or a couple, in which neither partner have owned a primary residence home in the past 3 years.

Limitations:

1) Your adjusted gross income needs to be under $75,000 ($150,000 for couples filing jointly) in order to get the full credit. If you go over that limit, the amount of credit you get begins to decrease.

2) The property can not be acquired from a person related to the person buying the property.

3) You have to be a taxpaying resident.

4) You can not dispose of such residence, or have that residence seize being your primary residence, before the close of the taxable year. 

Dates: All revisions are effective as of January 1st, 2009 and end December 31st, 2009.

Recapture: If the home is sold within 3 years of purchase the entire credit amount is recaptured.

Eligible Properties: Include Single Family Homes, Condos, Co-Ops, and Townhomes. 

 

Extra Credit

Also a interesting note is that it is not a tax deduction but a tax credit. Meaning, for example if your total credit ends up being the whole $8,000 and your tax liability is $2,000 you will actually receive a $6,000 check from the government. It is also my understand that in order to receive the credit one would have to fill out a tax form or two, but you will have to talk to your tax advisor or CPA in order to find out exactly which one.

 

Will It Help?

I hope this helps to push the “one the fence” home buyers into purchasing a home, but in all honesty I do not see this alone turning the housing market around. It seems to me that we do need to make sure that every eligible person takes advantage of this, this way they can spend their credit or refund on purchasing things for that home, thus stimulating the economy some.