$8,000 Buyer Tax Credit - No Repayment!

The Economic Stimulus Bill (The American Recovery and Reinvestment Act of 2009, H.R. 1.) has been passed by the US House of Representatives and US Senate and it's certain to be signed by the President on Tuesday 2/17/09.

The First-time Homebuyer Tax Credit - an $8000 tax credit (or 10% of the home purchase whicever is less) will be available for qualified purchase of a principal residence by a first time homebuyer between January 1, 2009 and December 1, 2009. The credit does not require repayment. Individuals who purchase in 2009 using financing assistance from state and local mortgage bonds (such as WHEDA) will be permitted to use the credit, as well.

The Tax Credit is for home buyers (either spouse if filing jointly) who have NOT owned a principle residence during the three-year period prior to the purchase. Ownership of vacation property or rental property does not disqualify home buyers from this program. To qualify for the full tax credit, married couples' modified adjusted gross income (MAGI) should be under $150,000 and single filers' MAGI should be less than $75,000. Partial tax credits may be available for married couples with MAGI incomes of over $150,000 but under $170,000 and single filers with incomes over $75,000 but under $95,000. If married couples who qualify for the first-time tax credit file separately, they would both claim 5% of the home purchase or $4,000 each (whichever is less) on their tax returns. There is no recapture or repayment clause IF the home is owned for at least 36 months.

This a great gift for the first time buyer who has the downpayment (minimum 3.5% for an FHA loan). We would have preferred to see the credit as the downpayment or part of the downpayment reflected on the closing statement making it much easier for buyers to buy right away. Nevertheless, if buyers are interested in buying this year they can start saving the tax credit by updating their W-4 forms with the employer so less money is deducted from their paycheck.