Say Goodbye to the $15,000 Home Buyer Tax Credit. Say Hello to an $8,000 First-Time Homebuyer Tax Credit.

February 18, 2009

This whole tax credit thing feels like an auction gone awry. For the last week, we have heard numbers from $15,000 to $7,500 and back up to $8,000. Loan Mitigation Advocates have been involved in discussions with clients and co-workers about the exact make-up of the tax credit – everything from the actual amount of the credit to whom it applies – first time home buyers or all home buyers. For a while, it seemed that we wouldn’t have a definitive answer.

Well, it looks like we have some answers. We recently read a blog from Jay Thompson, a Phoenix Real Estate Broker, who has been following the action closely. Here is a link to his site for those of you who are interested in getting some more insight. Also, Jay provided a synopsis on the breakdown for the first-time homebuyer tax credit.

The bottom line is that the $15,000 tax credit for home buyers has been reduced to $8,000 and is now only specific for first-time home buyers.

For a chart that breakdowns the first-time home buyer tax credit

FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act
Major Modifications Bolded
February 2009

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

Note: Please consult your tax accountant or attorney to get a better understanding on how the tax credit will impact you.

Written by Adam Golden · Filed Under Featured, Real Estate News

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Say Goodbye to the $15,000 Home Buyer Tax Credit. Say Hello to an $8,000 First-Time Homebuyer Tax Credit.

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