FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act
Major Modifications Underlined
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 |
Thank you for the work in doing the comparitive. This just got bookmarked.
Thanks Renee. I'm happy to be used as a resource.
Karl,
The repayment is a bug to those first timers in 2008.......and guess who is getting the calls.
Definitely, but a 15 year interest-free loan is still a good deal.
I have heard that you now can use the 8000.00 tax credit and take it to use it as down payment? Is this true?
Please explain
Thanks Karl,
Dan Surman
Weichert Realtors, East Brunswick
Hi Dan,
Yes and no.
HUD did make an announcement last week that they would start allowing FTHB's to start using the $8,000 tax credit to cover down payment and closing costs for FHA loans. This is great news; however it will take some time before this is put into practice.
The plan is for lenders to allow for a short-term bridge loan that the borrower would have to pay back when they receive their tax credit from the government. Individuals lenders will need to review the plan, determine if they choose to participate, and put in place a program they deem acceptable. Lenders would potentially be lending more than the value of the home at time of settlement so I would expect they will be cautious in their decisions.
In the meantime, here in NJ those who go through the New Jersey Home and Mortgage Finance Agency First Time Home Buyer Program are eligible to borrow up to $5,000 of the tax creedit at time of settlement to help with their down payment and closing costs.