New Homebuyer Tax Credit – The American Recovery

In an effort to stabilize home values, the First-Time Homebuyer Tax Credit enacted in 2008 has been modified and extended by the American Recovery and Reinvestment Act of 2009. In a nutshell, here are the new rules for home purchases in 2009 –

• The credit is for 10% of the purchase price limited to $8,000 (up from $7,500 under the 2008 law).

• The new home must be purchased in 2009 before December 1, 2009 to qualify. A taxpayer can elect to take the credit on a 2008 income tax return even though the residence was purchased in 2009.

• Repayment is no longer required if the taxpayer lives in the home for 36 months. The credit is recaptured and must be repaid if the home is sold or discontinued as a primary residence during the 36 months following purchase. The repayment is due on the tax return for the year the home was sold or use was discontinued.

• The credit is phased out for taxpayers with adjusted gross income between $75,000 and $95,000 ($150,000 - $170,000 for joint filers).

A taxpayer is considered a first-time homebuyer if the taxpayer (or spouse) had no ownership in a principal residence during the three year period preceding the purchase of the home.

The National Association of Homebuilders has developed a website, Federal Housing Tax Credit, that further details the plan and answers many frequently asked questions.