2009 Homebuyer Tax Credit

In its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for purchasers of homes that have not owned a home in the past three years.*

But time is of the essence for buyers who want to take advantage of this opportunity. Only homes purchased on or after January 1, 2009 and before December 1, 2009 are eligible. Here are some of the highlights:

Ø      The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

Ø      The tax credit does not have to be repaid, although home buyers must use the home as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.

Ø      The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

Ø      The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.

Ø      Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

Ø      If you are qualified for the tax credit and buy a home in 2009, you can apply the tax credit against your 2008 tax returns. The law allows taxpayers to elect to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) can apply. A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Ø       Those buying homes who wish to claim the credit on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. This will allow an eligible homebuyer to receive a check from the treasury soon after closing on their home. 

Ø       This tax credit is “refundable.” This means an eligible homebuyer may get a check for the credit even if the credit exceeds their tax liability. In plain English this means the Federal government will send you a check for up to $8,000 if you purchase a home, qualify for the credit and do not owe any money to the IRS.

* This information is provided as a courtesy to inform prospective homebuyers of the tremendous opportunity this legislation affords them. For tax advice on your specific circumstance please consult your tax professional.