Below are important points about the new 2009 First-Time Homebuyer Tax Credit that Realtors® need to know.
The homebuyer tax credit is one of 10 key provisions of the American Recovery and Reinvestment Act signed into law by President Obama on February 17, 2009.
The bill provides for an $8,000 tax credit available to first-time homebuyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment and can 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. Over 300,000 first-time homebuyers are expected to take advantage of this program. It is important that every Realtor® know the basics of the new tax credit and where
to get more information for their customers and clients.
1. The amount of the credit is $8,000 and it is not a loan.
Unlike the old 2008 program, this is a true credit via “tax refund” of $8,000 (or 10% of home purchase price, if less). To get this
money, you file your tax return FY2009 or amend your 2008 return and get your refund this year. Recapture or repayment will only be required if you sold your home within 36 months of purchase.
2. Who are eligible first-time buyers?
Any person who has not owned a principal residence in the past three years qualifies as a firsttime homebuyer. Also, someone who owns rental property or a vacation home that is not their principal residence could still be a first-time homebuyer.
3. The income limit is $75k for singles and $150k for couples.
A taxpayer must determine their modified adjusted gross income or MAGI. To find it, they find their “adjusted gross income” or AGI for the year. On Forms 1040 and 1040A, AGI is the last number on page one and first number on page two of the form. Note that AGI includes all forms of income including wages, salaries, interest income, dividends, and capital gains. To determine modified adjusted gross income (MAGI), add to AGI any foreign income, foreignhousing deductions, student-loan deductions, IRA-contribution deductions, and deductions for higher-education costs. Singles’ MAGI limit is no more than $75,000 and married couples cannot make more than $150,000 for the full credit. Partial credit is available for those with MAGI
between $75k to $95k ($150k-$170k for joint filers).
4. What housing qualifies as a ‘principal residence’?
Single family homes, condos, townhouses, and co-ops qualify so long as they are used as the taxpayer’s principal residence and purchased on or after January 1, 2009 and before December 1, 2009. Homes purchased last year do not qualify for this program. Also, sales between immediate family members are ineligible.
5. Is there anything else homebuyers should know?
Yes! This Q&A is intended to provide a quick overview. There are numerous other provisions in the new credit and homebuyers should understand them clearly before they make any decision regarding their eligibility. For more comprehensive information, including a free power point you can use at sales meetings or with buyers and sellers, go to marealtor.com and click here.
NOTE: This article is for informational purposes and should not be construed as tax or legal advice. For specific advice on their own tax situation, consumers should always consult a qualified tax professional.