February 18, 2009

First-Time Home Buyer Tax Credit - Changes to Original Program

Posted to Real Estate Tips & Info, Scott Dearnley

In 2008, a first-time home buyer tax credit was passed by the Bush Administration. Unfortunately, it did not have much of a stimulative effect on the housing market due to numerous poor provisions in the legislation. As part of the economic stimulus package (The American Recovery and Reinvestment Act of 2009) that was just passed by the Obama Administration, many changes have been made to this program. While the final bill did not have the $15,000 credit for all buyers that most people in the housing industry had wished for and was passed by the Senate, at least there are improvements to the original program.

Here is an overall look at the NEW program:

New: 10% of purchase price up to a max of $8,000 tax credit for first-time home buyers
Old: 10% of purchase price up to a max of $7,500 tax credit for first-time home buyers

New: This credit DOES NOT have to be repaid
Old: The old credit was really in interest free loan to be repaid over 15 years

New: The program is available for purchases through November 30, 2009
Old: The old program only ran through June 30, 2009

What if you purchased in 2009 prior to the enactment of this legislation?
You are safe. The bill covers purchases from January 1, 2009 through November 30, 2009.

What is the definition of purchase date?
The purchase date is the date when CLOSING occurs. Simply having a property under contract at November 30th is not good enough. It must be closed. If a purchaser contracted to have a home built, this does qualify and the purchase date is measured as the date of occupancy.

What is the definition of a first-time home buyer?
A first-time home buyer is defined as a buyer who has not owned a principal residence during the 3 year period prior to the purchase. For married taxpayers, the law tests the ownership history of both spouses. In other words, both husband and wife must each qualify.

Are there any income phase outs?
The credit begins to phase out at a modified AGI of $75,000 for an individual and $150,000 for couples and is completely phased out at $95,000 and $170,000, respectively. This is the same as the old program. No changes were made in this area.

These are just a few highlights of the bill and answers to a couple of the most frequently asked questions. For a more in depth look at this legislation, please visit www.federalhousingtaxcredit.com or call Scott Dearnley at 804-938-5277 with any questions. In addition to the Federal program described here, there is talk of a $5,000 Virginia credit on the State level. I do not know much about this at the moment, but will report on this as more information becomes available. Good luck and happy house hunting!

Posted By: Scott Dearnley