"First Time" Home Buyers Take Note-Really "Did Not Own a Home in 3 Years DEAL!"

MortgageMinute
February 17th, 2009

Compliments of
Matthew Hibler
Coldwell Banker Home Loans, Reprinted here with permission

PHONE:
(303) 409-6176

The Stimulus Plan was signed into law by President Obama today. It contains a new tax credit for first-time homebuyers. Essentially, first-time homebuyers within certain income limits who purchase a home in 2009 before December 1, 2009 will receive a tax credit of up to $8,000. The program is similar to the $7,500 tax credit which applied to home purchases made in 2008 after April 9. A comparison of the two credit programs is outlined below.

While the Stimulus Plan was still being debated, the Senate version originally included a $15,000 tax credit for all homebuyers. To lower the cost of the Stimulus Plan, the final version of the Plan contained this smaller tax credit, and this tax credit is applicable only to first-time homebuyers.

To qualify as a first-time home buyer as defined in the programs, the purchaser (and the purchasers spouse) may not have owned a home in the three years prior to the purchase date of the home. Single family homes qualify for the program. The home must be the primary residence.

Both tax credits are subject to the same adjusted gross income limitations (full credit for AGI less than $75,000 single/$150,000 joint, phased out for AGI up to $95,000 single/ $170,000 joint).

The amount for either credit is the lesser of 10% of the home purchase price or $7,500 or $8,000, as applicable.

While a purchaser still owns the home, the $7,500 credit must be repaid in equal payments over a period of 15 years, starting with the 2010 tax filing. The $8,000 credit will not need to be repaid. Again, the $7,500 credit needs to be repaid, while the $8,000 credit does not!

Upon sale of the home, any portion of the $7,500 credit not yet repaid is due in full. No portion of the $8,000 credit is due upon sale of the home, if the home is owned for more than three years. If the home is sold within the first three years, the full amount of the credit is due upon sale.

The $7,500 credit was not available to any purchaser utilizing state/local revenue bond money to help finance the home purchase. There is no such restriction on the $8,000 credit.

Under both the $7,500 and the $8,000 programs, the credit will be claimed on the purchaser's income taxes. Any amount in excess of taxes owed will be refunded to the purchaser.


Modified to be displayed here:
FIRST-TIME HOMEBUYER TAX CREDIT

As Modified in the American Recovery and Reinvestment Act

Modifications are marked by "B", as created in 2008 marked by "A"
February 2009

FEATURE
"A"- CREDIT AS CREATED JULY 2008
APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008
"B"REVISED CREDIT –
EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009

Amount of Credit
"A"-Lesser of 10 percent of cost of home or $7500
"B"-Maximum credit amount increased to $8000

Eligible Property
"A"-Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.
"B"-No change

All principal residences eligible.

Refundable
"A-Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.
"B"- No change, Purchasers will continue to receive refund for unused amount when tax return is filed.

Income Limit
"A"-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).
"B"-No change, Same income limits continue to apply.

First-time Homebuyer Only
"A"-Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
"B"No change, Still available for first-time purchasers only. Three-year rule continues to apply.

Revenue Bond Financing
"A"-No credit allowed if home financed with state/local bond funding.
"B"-Purchasers who utilize revenue bond financing can use credit.

Repayment
"A"-Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.
"B"-No repayment for purchases on or after January 1, 2009 and before December 1, 2009

Recapture
"A"-If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.
"B"-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
"A"-July 1, 2009 (But note program changes for 2009)
"B"-December 1, 2009

Effective Date
"A"-Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year.
"B"-All revisions are effective as of January 1, 2009