Monday, February 16, 2009

First Time Homebuyer Tax Credit Update

First time home buyers in Ann Arbor and surrounding areas have one more reason to get excited about buying a home. The Federal governments American Recovery and Reinvestment Act of 2009. Here is a very good chart that summarizes the major modifications to the first time homebuyer tax credit.

From the National Association of Realtors website:

Homebuyer Tax Credit – The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: 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 as a check to the purchaser.
Chart Highlighting the Major Modifications to the First-Time Homebuyer Tax Credit> (PDF: 309K)

FEATURE

CREDIT AS CREATED JULY 2008 APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008

REVISED CREDIT –EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009

Amount of Credit

Lesser of 10 percent of cost of home or $7500

Maximum credit amount increased to $8000

Eligible Property

Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.

No change All principal residences eligible.

Refundable

Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.

No change Purchasers will continue to receive refund for unused amount when tax return is filed.

Income Limit

Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000).

No change Same income limits continue to apply.

First-time Homebuyer Only

Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.

No change Still available for first-time purchasers only. Three-year rule continues to apply.

Revenue Bond Financing

No credit allowed if home financed with state/local bond funding.

Purchasers who utilize revenue bond financing can use credit.

Repayment

Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.

No repayment for purchases on or after January 1, 2009 and before December 1, 2009

Recapture

If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.

If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.

Termination

July 1, 2009 (But note program changes for 2009)

December 1, 2009

Effective Date

Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year.

All revisions are effective as of January 1, 2009

3 comments:

  1. WTF ? So me an my wife did everything we could to close by 12/30/2008 (and we did) in order to take advantage of the 1st time home buyer credit during the 2009 tax period and now the rules have been altered that had I waited 1 more day or 24 hours( 01/01/2009 ) I would not have to pay the money back ? Instead I'll be paying it back for 15 years ? again I ask WTF ?

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  2. I agree with you, Angry buyer. I closed my place on November 14 last year. I wish they had removed the repayment obligation for people who claimed the $7,500 credit...

    I got so excited about all of the speculation, only to find out that I'm screwed. The housing market's still got no bottom, so I probably should have waited until now. THIS SUCKS!

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  3. Its a little rough to miss this $8,000 CREDIT by just a couple of days. I would write your congress person and let them know how you feel - seems like they should make the $7,500 "loan" a full tax credit for the reasons you mentioned above.

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