2009 American Recovery and Reinvestment Act
A refundable first-time homebuyer tax credit of up to $8,000 is the centerpiece of housing incentives found in the 2009 American Recovery and Reinvestment Act.
The new credit is designed to boost sales in the nation’s sagging housing market by offering a strong incentive to first-time homebuyers. Lawrence Yun, chief economist for the National Association of Realtors, predicts 300,000 home purchases will be made in 2009 as a result of the tax credit.
The new credit improves on a first-time homebuyer credit passed in 2008. That credit had to be paid back over a period of 15 years, making it more of a loan than a true credit.
The greatest part of this tax credit is that homebuyers can take the credit on their 2008 tax return even when they have purchased the home in 2009. Homebuyers can take advantage of this filing exception in one of three ways:
- Closing on the home prior to April 15, 2009
- Getting an extension to file taxes later in the year or
- Filing an amended return.
Specifics are below:
- The Tax Credit is for up to 10 percent of the purchase price, up to a maximum of $8,000.
- For example, a buyer of a $150,000 home could receive a tax credit of a maximum of $8,000, while a first-time buyer of a $70,000 home would be eligible for a tax credit of $7,000.
- The Tax Credit does not have to be repaid unless the home is sold within three years.
- Applies only to first-time homebuyers, defined as those who have not owned a home within the previous three tax years.
- The Tax Credit is available only for homes purchased between Jan. 1, 2009, and Dec. 1, 2009.
- Restricted by income; The Tax Credit phases out for individuals with an adjusted gross income of $75,000 or above and for married couples with a combined adjusted gross income of $150,000 or above.
- The credit can be taken on 2008 taxes even when the purchase is made in 2009.
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