REAL ESTATE RESOURCES AND INFORMATION

In-Depth: 2009 Tax Credit

The homebuyer tax credit is one of 10 key provisions of the American Recovery and Reinvestment Act signed by President Obama into law on Feb. 17, 2009.

The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

Congress has extended and expanded the homebuyer tax credit. The modifications in the column labeled "December 1 – April 30, 2010" become effective when President Obama signs the bill. All changes made to the current credit become effective on that date, as well. See the resources below for more detailed information.

First-Time Homebuyers -

  • Tax Credit of $8000 or 10% of sales price.
  • Must be "principal residence".
  • Could not have owned a home within 3 years prior to the closing date of new purchase.

Long-Time Residents of Same Principal Residence -

  • Tax credit of $6,500 or 10% of sales price.
  • Must have owned home for 8 years and lived in that home consecutively for 5 years out of those 8 years. 
  • Current home must have been principal residence.

Special Rule for Members of Armed Forces -

  • Member of "Uniformed" Services.
  • Member of Foreign Service of the United States.
  • Employee of Intelligence Community.
  • Extended Duty defined as "Official Orders outside the United Stated for at least 90 days during the period 12-31-08 and May 1, 2010".
  • Tax Credit Dates Extended.

Important Dates:

  • Sign a sales contract between November 6, 2009 and April 30, 2010 and close by June 30, 2010.
  • Qualified Armed Forces - December 1, 2008 and April 20, 2011 and close by June 30, 2011.

Income Limits Increased:

  • $125,000 Single
  • $225,000 Married
  • Modified Adjusted Gross Income (MAGI) – can earn up to $20,000 more than income limits and still get a partial tax credit.

Age Limit:

  • 18 Years old on Date of Closing
  • If married, and spouse is less than 18 years old, other spouse must be 18 years old

Maximum Sales Price

  • $800,000

Proof of Purchase -

Copy of HUD 1 must be attached to IRS 5405 “First Time Homebuyer Credit� form.

Ineligible Home Buyers

  • Non-resident aliens.
  • If property disposed of before the end of the tax year.
  • If property ceases to be principal residence before the end of the tax year.
  • If property is acquired from a person who is "related" to the homebuyer or if married, the homebuyer spouse (this was added to the HR 3548).
  • Income exceeds income limits (MAGI calculations).
  • Less than 18 years old.

Pay Back of Tax Credit

  • If home is sold within 36 months of acquisition, tax credit must be repaid in its entirety.

Type of Homes That Qualify

  • Single Family
  • 2-4 Family (Only dollar value of O/O portion can be claimed as "sales price".)
  • Townhomes & Condos
  • Houseboats
  • Mobile & Modular Homes
  • New Construction (Note – Date of occupancy is considered the "closing date".)

MORE RESOURCES: