I wanted to pass along some information about the tax credit that has been passed recently.  The Senate was trying to pass a bill that would have given up to a $15,000 tax credit for buyers this year who bought a primary residence.  While the $15,000 did not get approved, the house and senate did agree on an $8,000 tax credit. While $15,000 would have been better, $8000 will still be a big boost to those buyers who have not owned a home in the last 3 years. Here are the details of the tax credit that was part of the stimulus bill that the President signed into law. 

1.  $8,000 for new buyers: The tax credit included in the economic stimulus legislation is much narrower than the $15,000.00 proposal.  This credit is equivalent to 10 percent of the purchase price of the home–although it’s capped at $8,000 and applies only to first-time home buyers (defined as those who have not owned a home in the last 3 years) and it must be for principal residences. But unlike an earlier $7,500 home buyer tax credit, This one does not have to be repaid.

2.  2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won’t be able to take advantage of it.

3.  Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that’s $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits. 

4.  Refundable: Because the tax credit is “refundable,” qualified buyers can take advantage of it even if they don’t have much tax liability. In other words…unlike the $15,000 tax credit, this tax credit will be refunded to a buyer, if his year end tax liability is less than the credit.

5.  Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.) If you have more questions, please contact me at 512-515-5263.

Shane