Fact Sheet Provided by Windermere Napa Valley Properties

First-Time Home Buyer Tax Credit Modified February 2009. Available January 1 - November 30, 2009 as modified in the American Recovery and Reinvestment Act. For 2009, Congress has increased the credit to $8,000 and made several improvements. This revised $8,000 tax credit applies to purchases on or after January 1, 2009 and before December 1, 2009.

Who is Eligible

The tax credit of up to $8,000 is now available for first-time home buyers only.

The law defines a first-time home buyer as a person who has not owned a principal residence/ home in the past 3 years prior to purchase.

All U.S. citizens who file a tax return are eligible to participate in the program.

Income Limits – Same income limits continue to apply

Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 credit if their adjusted gross income (AGI) is less than $75,000.

For married couples filing a joint return, the income limit doubles to $150,000.

Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit.

Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.

The credit is not available for single taxpayers whose AGI is greater than $95,000 and married couples with an AGI that exceeds $170,000.

Effective Dates for the Revised Tax Credit

First-time home buyers would receive an $8,000 tax credit for the purchase of any home on or after January 1, 2009 and before December 1, 2009. To qualify, you must actually close on the sale of the home during this period.

If you purchased your first home between April 9, 2008 and December 31, 2008, you may still qualify for the previous $7,500 tax credit.

Mortgage Revenue Bond Financing

Congress eliminated the financing restriction that applied in 2008. In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit.

Tax Credit is Refundable

A refundable credit refers to the difference between the $8,000 credit amount and the amount of tax liability.

For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government.

If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus $8,000 from the home buyer tax credit).

Buyers can take the tax credit in their 2008 or 2009 tax return.

If you purchased the home in 2008, the tax credit is taken on your 2008 tax return. If you buy in 2009, you have the option of taking the credit on your 2008 or 2009 tax returns.

Types of Homes that Qualify for the Tax Credit

All homes, whether single-family, townhomes or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a home in the prior three years. This also includes newly-constructed homes.

Payback Provisions

Unlike the 2008 $7,500 tax credit, buyers who purchase a home on or after January 1, 2009 and before December 1, 2009 do not have to repay the $8,000 credit.

2008 purchasers still have to repay their tax credit. The $7,500 tax credit in 2008 essentially serves as an interest-free loan to be repaid over 15 years. Repayment to begin at the 2010 tax filing.

For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. If the home owner sells the home before the entire credit is repaid, then the outstanding balance owed would be due from the profit of the home sale.

If there was insufficient profit, then the remaining credit payback would be forgiven.

For homes purchased in 2009, if the home is sold within 3 years of purchase, you are required to pay back the full amount of any credit, including  refund you received from it.

This is for informational purposes only, and should not be used as a substitute for legal or tax advice.

Do not rely on this information to make any important decisions without consulting your tax advisor first.

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