-Tax Credit Changes-

In 2008 Congress created a $7,500 First-time Homebuyer Tax Credit. It went into effect April 8, 2008 and was set to expire July 1, 2009.

The Big Problem: It had to be repaid over 15 years. People viewed it as a debt and not a benefit.

Nar proposed changes:

Removeed repayment feature of the credit.

Extended the credit to the end of 2009.

Make credit available to every home Buyer.

The 2009 Tax Credit

Working with Realtors across the Country.

• We successeeded in removing the repayment requirement for 2009
• The credit has been extended to on or before November 30, 2009 and can be claimed by those who closed on homes on or after January 1, 2009.
  *It is still repayable for 2008 purchases*
• The credit has been expanded to $8,000.
• But it is still only for first time homebuyers.

Credit Details

The new Credit is an $8,000 REFUNDABLE Tax Credit (or up to 10% of the Purchase price.

• So if the property is $75,000, the credit is only $7,500. (Assume a property over $80,000 for the rest).

Refunability - Why it's important

Refundable means that if your total tax liability in the given year is less than $8,000, the IRS will send a refund for the balance.

Many tax payers do not have tax liability that exceeds $8,000.

EXAMPLE - according to the 2008 IRS Tax tables:

1. A single filer would need $46,600 in tazable income to have $8,000 in tax liability.
2. A couple would need $58,600 in taxable income to have $8,000 in tax liability.
3. Those with less tax liability will in most cases get a refund meaning they get the full value of the credit.

Who cannot take the credit?

If any of the following:

• Your income exceeds the phase-out range. This means joint filers wotj Modified Adjustment Gross Income (MAGI) of $170,000 and above and other taxpayers with MAGI $95,000 and above.
• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You stop using your home as your main home.
• You sell you home before the end of three years.
• You are a nonresident alien.

First Time Home Buyer Definition

Defined as someone who owned another main home at any time during three years prior to the date of purchse.

EXAMPLE: If you bought a home on January 15, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another home at any time from January 15, 2006 through January 15, 2009.

So if the last time you owned a home was 2005, you are eligible for the credit even though it is really not your "first" home.

For married joint filers, both must meet the First Time Homebuyer's test to take the credit on a joint return.