What’s the Difference Between the Old and New First Time Homebuyer’s Tax Credit?

Unless you’ve been living in a cave for the last 30 days, you probably have heard about the Economic Stimulus Bill that was passed and signed into law last month by President Obama. If you have been cave dwelling, click here. We here at The Peters Company were most concerned with the First Time Homebuyer’s Tax Credit. We had a mediocre tax credit previously in place, which basically gave the first time homebuyer an interest free loan of $7,500 that they paid back over a 15 year period. That has been blown up, replaced, and upgraded. Although it wasn’t as good as we were hoping for, the new plan makes significant progress over the previous credit/loan program. We thought it might be beneficial to outline the differences for you. If someone you know is on the fence about buying their first home, now is the time to share this with them. We are entering the busier Spring real estate season, and there will be some great homes hitting the market over the coming months. This credit lasts until December 1, 2009. The high inventories and low rates are now only helped by an $8,000 tax credit, which by the way you don’t have to repay. Check it out, and let us know if we can help in any way.

FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act
Major Modifications Italicized
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

Chart courtesy of Leigh Clack at Neel & Robinson, Attorneys at Law, LLC. Contact Leigh at lenox@neelandrobinson.com. She is an excellent closing attorney.

This entry was posted on Friday, March 6th, 2009 at 6:11 pm and is filed under Financial, Home Tips, Investing, Legal, The Peters Company. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.