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Off the subject of credit for a moment to discuss the 2009 American Recovery and Reinvestment Act.
A tax credit of up to $8,000 or 10% of the purchase price is at the heart of the 2009 American Recovery and Reinvestment Act (ARRA). According to lending guidelines, a 1st time homebuyer is someone who has never owned a home, or someone who has not owned or co-owned a house in the last three years proceeding the date that you close on your 2009 purchase.
The tax credit is an attempt by the Federal Government to spur a flurry of home buying in 2009. According to Lawrence Yun, chief economist for the National Association of REALTORS®, he predicts homebuyers will purchase an additional 300,000 homes in 2009 as a result of the tax credit. “The impact will likely not be felt for at least three or four months, because it generally takes buyers that long to qualify for a mortgage and search for a home,” says Yun.
Gibran Nicholas, chairman of the Certified Mortgage Planning Specialists Institute (CMPS), which certifies mortgage banker and brokers, said his group was in favor of a more generous tax credit. “This tax credit is more of a half-step, but at least it is in the right direction,” says Nicholas.
Here are some of the rules for the 2009 ARRA first-time homebuyers’ 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.
- Available only for homes purchased between Jan. 1, 2009, and Dec. 1, 2009.
- Restricted by income; 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.
- Tax credit is for up to 10 percent of the purchase price.
- The credit can be taken on 2008 taxes even when the purchase is made in 2009.
According to the 2009 ARRA, the house you buy must be used as your primary residence. Sorry investors and second home buyers. According to IRS rules, houseboats, house trailers, cooperative apartments and condominiums are acceptable.
If you bought a home in 2008 using the $7,500 tax credit, you will have to repay that credit, or loan as it were, over the next 15 years with no interest. However buyers in 2009 will reap the benefits of the 2009 ARRA first time homebuyer’s tax credit by not having to repay the $8,000. You will have to pass most of the eligibility requirements imposed under the 2008 program and those listed above.
So that means that only those buyers who close between January 1st and December 1st of this year will qualify for the new, no-repay credit.
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Great Summary on the 2009 Housing Tax credit! To receive the the credit if you have already filed your 2008 tax return, you need to AMMEND your Federal Return and you’ll receive the credit ASAP.
Keandra Sandifer (The Real Estate Marketer)
Keandra,
Thank you for your kind words. Great point on receiving the credit it you have already filed your taxes this year. People need to be made aware that they can amend their taxes.
Benjamin
I have heard about this already on other real estate blogs. Nothing similar has been implemented here in the UK
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Lets hope that they can start giving people incentives to purchase soon! Thanks for the comment.
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This is fantastic, especially since I am looking to buy a new home. As long as I don’t resell within three years I should be good! I am a first-time home buyer.
Im sure there will still be some investors who will try and finagle the applications to make it look like they are buying a first home. But with that being said I think this is a great program. I wish this program was available when I was doing mortgages but the economy flushed me out I couldn’t afford to stay in that market.
The $8000 tax credit has been more of an incentive than anyone could have imagined. Even in San Diego, where home prices are still above $300,000, that little $8000 boost has opened the floodgates. People are scrambling to buy homes before the tax credit expires at the end of November. And it’s not so easy. The inventory has been low, and prices have risen as a result. Everyone is hoping that the tax credit will be extended.
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great website and nice share
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