FIRST TIME HOME BUYER TAX CREDIT

THE END IS NEAR

The end is nearing for the first-time homebuyer tax credit. In order to qualify, homebuyers must close on or before midnight on December 1st of this year. The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009. The National Association of Realtors® estimates close to two million first-time buyers will have taken advantage of the $8,000 tax credit this year, stimulating an additional 350,000 home sales.

How much is the Tax Credit?

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

Qualifications

There are a number of qualifications the home buyer must meet.  The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. There is an income limit for single taxpayers of $75,000. In order to qualify, the buyer must purchase a principal residence on or after January 1, 2009 and must close on or before midnight on December 1st of this year.

Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. It also includes new homes built by a contractor for the owner. The date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

Some Interesting Features of the Tax Credit

There are some interesting features of the tax credit. First, HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain down payment and closing cost expenses.

Unlike the Tax Credit of 2008, for homes purchased in 2008, the credit is similar to a no-interest loan. This tax credit does not have to be repaid, unless the home ceases to be the main residence within a three year period following the purchase. Additionally, homebuyers are allowed to claim the tax credit and participate in a program financed by tax-exempt bonds.

More information

More information about the First-Time Home Buyer Tax Credit can be found on the IRS website and The American Recovery and Reinvestment Act of 2009: Information Center