President Obama signed into law his unprecedented stimulus package yesterday. Of special interest to potential home buyers is the $8000 tax credit for buyers who purchase their first home between January 1, 2009 and December 1, 2009. Unlike the recent $7500 tax credit incentive, this DOES NOT NEED TO BE REPAID (unless home is sold within 3 years of purchase)! To qualify as a "first time home buyer" the purchaser (and his or her spouse, if applicable) must not have owned a home in the past three years. Given this new incentive, low home prices, good interest rates and plenty of inventory, this is a FABULOUS time to buy a home!
Here's a chart from realtor.org that lays out the changes in a way that is very easy to digest at a glance:
FIRST-TIME HOMEBUYER TAX CREDIT As Modified in the American Recovery and Reinvestment Act
Major Modifications Italicized
February 2009 FEATURE | CREDIT AS CREATED JULY 2008 APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008 | REVISED CREDIT – EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009 |
Amount of Credit | Lesser of 10 percent of cost of home or $7500 | Maximum credit amount increased to $8000 |
Eligible Property | Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence. | No change All principal residences eligible. |
Refundable | Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser. | No change Purchasers will continue to receive refund for unused amount when tax return is filed. |
Income Limit | Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000). | No change Same income limits continue to apply. |
First-time Homebuyer Only | Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase. | No change Still available for first-time purchasers only. Three-year rule continues to apply. |
Revenue Bond Financing | No credit allowed if home financed with state/local bond funding. | Purchasers who utilize revenue bond financing can use credit. |
Repayment | Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing. | No repayment for purchases on or after January 1, 2009 and before December 1, 2009 |
Recapture | If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale. | If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009. |
Termination | July 1, 2009 (But note program changes for 2009) | December 1, 2009 |
Effective Date | Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year. | All revisions are effective as of January 1, 2009 |
Another feature of the stimulus package that I really like is the Energy Efficient Tax Credits and Grants. Homeowners who purchase new furnaces, windows or insulation for their homes through 2010 will be able to claim a 30% tax credit.
This is great news for people looking to buy their first home. Today President Obama is expected to roll out his plan to help the many homeowners who are at risk for foreclosure.