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First time homebuyer credit is hot this spring selling season
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The American Recovery and Reinvestment Tax Act of 2009 aka "Stimulus Bill" greatly expanded the first (1st) time homebuyer credit originally created in 2008. This is a windfall for new homeowners and amounts to free money. Unlike the 2008 credit that needed to be repaid, the 2009 credit was increased to $8,000 for joint taxpayers and $4,000 for single taxpayers but generally repayment is waived unless sold within 36 months and is fully refundable.
You qualify for the credit if you have not owned a primary residence or had an economic interest in a primary residence at any time during the three year period up to the date of purchase, buy a new or existing home between January 1, 2009 and December 1, 2009 and have income under $170,000 for joint taxpayers and $95,000 for single taxpayers. Phase outs begin at $150,000 for joint and $75,000 for single.
The credit is equal to 10% of the purchase price or maximum of $8,000 for joint and $4,000 for single taxpayers. It's a fully refundable credit so even if you owe no tax you can get a refund from the federal government for the full amount of the credit.
The credit may also be shared by unmarried couples filing separate returns so long as each is either economically responsible for the mortgage or each is on the title of the property. In this case, each taxpayer would receive $4,000.
For young professionals and couples just starting out, this is a great way to maybe purchase a fixer-upper at below market values and put in some sweat equity by using the credit to put in new windows and doors or buy furniture!
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Tom Taylor, CPA is a fee-only, independent Financial Planner and Certified Public Accountant and can be contacted at Thoma Capital Management in Towson, MD. He is a member of NAPFA and the MACPA and AICPA.
