The MODIFIED 2009 First-Time Homebuyer Tax Credit Explained

Friday, February 20, 2009

by Stephanie Dawson

This has been an interesting week in government and real estate! If you or someone you know is a first-time home buyer or a renter that has not owned a home in the last three years (i.e. you may have owned a home in the past), you most-likely would qualify for this revised first-time homebuyer tax credit. I realize that it may be confusing because of the way it has been presented by the media, and anytime there is a change in a program, it can cause confusion.

I'm here to help you understand what has changed, as far as first-time homebuying goes. The bottom line: FIRST TIME BUYERS GET AN $8,000 GIFT FROM THE GOVERNMENT. THEY MUST CLOSE ON THE SALE OF THE HOME BY NOVEMBER 30, 2009.

Here is how this modified Recovery Act looks as of February 17, 2009. I recreated this chart, which was put together by the National Association of REALTORS®. If you'd like to save it or print it, I've attached the link to the PDF file here.

First-Time Homebuyer Tax Credit (February 2009)
FEATURE	CREDIT AS CREATED JULY 2008 APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2009	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 $7,500.	Maximum credit amount increased to $8,000.
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 a refund for unused amount when tax return is filed.
INCOME LIMIT	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 HOMEBUYERS 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.