If you were looking to buy a home in 2008 but decided to wait it out and see what happens in 2009, go ahead and give yourself a pat on the back. You just saved yourself thousands of dollars.
The original tax credit for first-time homebuyers, in effect for first-time home purchases after April 9, 2008, was only a first attempt at getting people off the fence and into their own homes. That involved a $7,500 tax “credit”, though it was really an interest-free, long-term loan, since it had to be repaid in increments over 15 years.
And let’s be clear: Those first-time homebuyers who purchased a home between April 9, 2008 and December 31, 2008 cannot take advantage of the new changes included in the stimulus package of 2009. They are still required to re-pay that loan. For those who waited until 2009, however, the news is quite a bit better.
The First-Time Homebuyers Tax Credit included in the American Recovery and Reinvestment Act of 2009 was amended slightly, but those amendments are significant for first-time homebuyers who took a wait-and-see attitude in 2008.
1. No Repayment. The provision on the original bill which required repayment of the loan was removed. The new credit is a refundable tax credit, meaning that if your total tax liability for the given year is less than $8,000, the IRS will refund the balance. You can claim the credit on your regular or amended 2008 Tax Return or your 2009 Tax Return, as long as you occupy the home for at least 3 years. This provision was included to prevent house “flippers” taking advantage of the credit. If you sell before the 3 years, the credit will be recaptured at closing.
2. Extension. The new tax credit applies to home purchases made between January 1, 2009 and December 1, 2009. Be aware that if you build a new home, the “purchase” date is the date you occupy the home (not the closing date) so you must move into the new home prior to December 1, 2009 to receive the credit.
3. Credit Amount. The maximum credit amount was increased to $8,000, or 10% of the purchase price of the home, whichever is less.
4. Revenue Bond Financing. The new credit allows purchasers who utilize revenue bond financing to receive the credit.
Although the changes have improved the tax credit, it still doesn’t address the most widespread problem for new homebuyers: coming up with the down payment. There is still work to do, but Congress and the President have taken a step in the right direction by providing some relief for those sore from sitting on the fence for so long.
Read the full text of the American Recovery and Reinvestment Act of 2009 at www.recovery.gov.