Recently enacted legislation has changed some significant guidelines for the first time homebuyer tax credit which was implemented in 2008. As the government is doing everything in its ultimate capacity to try and revitalize a contracting economy, this new legislation might very well prove to be a great benefit for prospective buyers. Keep in mind, a first time homebuyer is one who has not had any ownership interest in a property for the previous three years. Here are a few highlights of the new legislation:
• Tax Credit has increased from $7,500 to $8,000
• Tax Credit does not have to be paid back!
• This policy is only for homeowners who purchased a home after January 1, 2009 or will purchase a home before December 1, 2009. This is not retroactive for homebuyer’s who purchased before January 1 of this year or on or after April 9, 2008.
• Income restrictions still apply; $75,000 adjusted gross income for singles and $150,000 adjusted gross income for couples. If your income exceeds this amount there is a partial tax credit still available, however the income cap limits are $95,000 and $170,000 respectively.
• Tax Credit is only available for principal residences, if you sell your home within 3 years the entire tax credit muse be paid back in full.
There is one caveat to the tax credit we all need to be made aware of; the max tax refund/credit available to taxpayers is $8,000. For example; if Joe Taxpayer has $7,000 in federal taxes deducted from his annual income and his tax base that year only requires him to pay $6,000, Joe Taxpayer is due a tax refund in the amount of $1,000. However, if he purchases a home this year he will receive an additional $7,000 through this approved legislation bringing his total tax refund to $8,000.
For specific information about the tax credit please visit the First Time Homebuyer Tax Credit website. For a great example of the new tax credit compared to the previous tax credit you can view the modified first time homebuyer tax credit pdf.
As always, questions and comments are welcomed!
