2009 Tax Credit for First Time Home Buyers


Would you like $8000 back on your taxes this year?


We've been hearing a lot of questions about the new tax credit. Who qualifies? How does it work? How long will it last? In this special edition video, we’re taking an in-depth look at the $8,000 tax credit for first time home buyers as well as the newly expanded credit to existing homeowners.




 

According to the new legislation, a first time home buyer is defined as someone who has not owned a principle residence in the past three years.  Those three years are counted up to the date you take possession of the house you buy in 2009. This means that even if you’ve owned a home in the past, you can still take advantage of the tax credit as long as you haven’t purchased a primary residence since 2006.

The same goes for married tax payers - they must both be first time home buyers.  For non-married joint buyers, only one of them needs to be a first time home buyer, or someone who  hasn’t owned a primary residence in the past three years.

Qualifying homes include:

  • New homes

  • Homes that are being re-sold

  • Condos

  • Townhomes

The main restriction is that the credit is only for those who buy a home as their primary residence. So investors looking to buy a rental property would not qualify for the credit.  However owning a vacation home or a rental property already does not neccessarily disqualify you from taking advantage of the credit (as long as you haven’t owned a primary residence in the past three years).

A Look at the Numbers

The tax credit is equal to 10% of the purchase price of the home, up to $8,000.   The amount of the credit you can qualify for is related to how much money you earn.  Here’s how the credit is scaled:

  • Single home buyers earning 95K or less qualify. If you make 75K or less, you qualify for 100% of the $8000. If you make halfway, 85K, you qualify for 50% or $4000. The credit phases out gradually between 75K and 95K of income. For example, if you make halfway between the income limits, 85K, you qualify for up to half of the credit.

  • The same rate applies for married couples and joint buyers whose incomes limits are doubled to $150,000 to $170,000. Married couples or joint buyers whose incomes are less would receive the full $8000 credit.  At an income level of  $160,000, halfway between 150 and 170, the buyers would receive half the credit – or $4,000.  And the credit phases out altogether at $170,000.

This credit represent a significant amount of money. One of the biggest points of difference for the new credit from the one congress passed in July of 2008, is that the new credit does not have to be paid back.

In addition, it's refundable, which means that if you’ve paid all your taxes as you go with an automatic payroll deduction, you would receive an $8,000 check from the IRS.

If you're committed to buying a house in 2009 and want to use the $8000 tax credit for a downpayment, consult with your certified public accountant.



The bill essentially remains intact but has a handful of important changes:

  Previous Provisions

 

 New Provisions
Effective Date January 1, 2009 November 7, 2009
Deadline Close before December 1, 2009
  • Contract signed before May 1, 2010, must close before July 1, 2010
  • Members of the uniformed services, foreign services, and intelligence employees who served an extended service of 90 days will have until April 30, 2011 and June 30, 2011.
Amount
  • First-Timers: maximum of $8,000 or 10% of sales price
  • Prior Owners: $0
  • First-Timers: Unchanged
  • Prior Owners: $6,500 if lived in prior home for at least 5 years of past 8 years
Income Limit
  • Individual: $75,000
  • Couple: $150,000
  • Individual: $125,000
  • Couple: $225,000
Other Restrictions Home must be primary residence for at least 3 years. If home is sold or buyer moves before 3 years, must re-pay full $8,000.
  • Buyer must be at least 18 years old and not classified as a dependent for tax purposes
  • Home must cost less than $800,000
  • Home must be primary residence for at least 3 years. If home is sold or buyer moves, before 3 years, must re-pay full amount of credit. Exception for military, foreign services, or intelligence with extended 90 days service overseas.
How to claim If purchased in 2009, by amending 2009 tax return or claiming on 2010 tax return If purchased in 2010, by amending 2010 tax return or claiming on 2011 tax return

 

 

 



If you’re interested in learning more about the new tax credit or about homes in your areagive me a call at 508-521-9480


In Summary

Qualifying home buyers will need to make their home purchase between January 1, 2009 and December 1, 2009.  And the home has to remain their principal residence for the following three years.  

The newly expanded tax credit coupled with historically low mortgage rates and rising affordability, offers buyers and sellers a great opportunity if they act fast.

If you’re interested in learning more about the new tax credit or about homes in your area give me a call @ 508-521-9480 or send me an email.