Since President Obama signed the stimulus bill officially called the “American Recovery and Reinvestment Act of 2009”, a lot of home buyers want to know how this affects their new home purchase this year, and how is it different from the First-Time Home Buyer Tax credit passed last year? Below is a breakdown of the changes:
FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act
Major Modifications in Bold
|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|