The first-time homebuyer tax credit has created many opportunities for
first-time homebuyers and has helped many individuals and families achieve the
dream of homeownership. By expanding the credit to existing homeowners, even
more opportunities are created for qualified buyers. Opportunities that are
taken advantage of will help stimulate economic activity and accelerate
recovery. The extension and expansion recently signed into law is part of the
economic stimulus program and includes these significant provisions:
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First-time homebuyers may be eligible for up to an $8,000 tax credit and are
defined by law as buyers who have not owned a principal residence during the
three-year period prior to the purchase. Existing homeowners who have been
residing in their principal residence for five consecutive years out of the
last eight and are purchasing a home to be their principal residence may be
eligible for up to a $6,500 tax credit.
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The eligibility period is for homes purchased after November 6, 2009 and before
May 1, 2010. Home purchases subject to a binding sales contract signed by April
30, 2010 will qualify for the tax credit provided closing occurs prior to July
1, 2010.
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All homes with a purchase price of less than $800,000 qualify and include
resale homes, new construction homes, single-family detached homes, townhomes,
and condominiums. Vacation homes and rental properties do not qualify.
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The tax credit is refundable. This means if the amount of income taxes you owe
is less than the credit amount you qualify for, the government will send you a
check for the difference. For example, if your actual tax liability is $5,000,
then after the tax credit is applied, you would receive a total refund of
$3,000. The refundable amount is the difference between the $8,000 tax credit
and the amount of your tax liability.
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Effective December 1, 2009, income eligibility limits to claim the full credit
for both groups of homebuyers have been raised to $125,000 for individuals and
$225,000 for joint filers. Individuals with incomes up to $145,000 and joint
filers with incomes up to $245,000 qualify for reduced credits.
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It is a true credit and does not need to be repaid as long as the home is
occupied for 3 years. If the home is sold prior to 3 years of ownership, the
tax credit must be repaid.
With historically low rates and exceptional affordability in the market, the
window of opportunity for both homebuyers and homeowners is now.
