FIRST-TIME HOMEBUYER TAX CREDIT

FIRST-TIME HOMEBUYER TAX CREDIT
What you need to know!

On Tuesday, February 17 President Obama signed into law “The American Recovery and Reinvestment Act” which, among other things, gives first-time homebuyers a tax-credit for up to $8,000 if they purchase a home between January 1, 2009 and November 30, 2009. Here are several things to know about the tax credit:

1. The tax credit included in the economic stimulus package applies only to first-time homebuyers and only to their principal residences. The amount of the tax credit will be 10% of the purchase price of the home up to a maximum credit of $8,000. Unlike the 2008 first-time homebuyer tax credit, this one will not have to be repaid.

2. First-time homebuyers for the purpose of this legislation refer to someone who has not owned a principal residence for the past 3 years. This restriction does not apply to second-homes or investment property

3. This new tax credit is only available for homes purchased between January 1, 2009 and November 30, 2009 – homes purchased last year are not eligible.

4. The tax credit is subject to income limitations. Single buyers who make up to $75,000 Adjusted Gross Income (AGI) and married buyers who make up to $150,000 AGI will receive the full tax refund. For incomes above that, the tax credit will be phased out.

5. This tax credit is a refundable tax credit. That means that even those with little or no tax liability will receive the entire amount of the tax credit.

6. The tax credit includes a recapture feature. This means that the buyer has to own the property for at least 36 months in order to capitalize the tax credit. If the home is sold in less than 36 months the buyers would have to repay part or all of the tax credit. There may be exceptions in some cases included death and divorce.