Improved First-Time Buyer Tax Credit Good Until December

The American Recovery and Reinvestment Act of 2009 improved on an earlier tax credit available to first-time home buyers. The new tax credit is worth up to $8,000 (or up to $4,000 for married filing separately) for qualified buyers who purchase a principal residence after December 31, 2008 but before December 1, 2009. Qualified buyers are those who have not owned a principal residence during the previous three years.

Good news: Unlike the previous $7,500 tax credit, this new $8,000 incentive is a true rebate and does not have to be repaid providing the home continues to be your principal residence for at least 36 months.

Qualified first-time buyers who purchased homes from April 9, 2008 through December 31, 2008 can still take up to a $7,500 tax credit ($3,750 for married filing separately), but must repay the credit over 15 years beginning two years after the purchase settlement/closing date. If the home ceases to be your principal residence before the credit is repaid, the unpaid balance becomes due in full. (If the home is sold, the balance is due to the extent gain on the sale is sufficient.)

Both the $8,000 and $7,500 credits are "refundable" -- that is, if your tax bill for the year is lower than the credit amount you qualify for, you would receive the difference as a tax refund.

The amount of the credit is limited to 10% of the purchase price of the home, up to the applicable dollar-amount limits. Those who qualify can claim the credit on their federal income tax return.

The full credit is available to married joint-filers (or equivalent filing status) with Modified Adjusted Gross Income (MAGI) up to $150,000, and to single filers and married filing separately with MAGI up to $75,000. The credit is phased out and disappears completely for MAGIs more than $170,000 (joint filers and equivalent) or $95,000 (others).

Please call us for more information and to find out if you qualify for this great limited-time tax credit.