$8000 Stimulus First-time homebuyer Tax Credit

If you buy a home in 2009

The President has signed and a bill that is extended to residence purchases before Dec. 1, 2009 and increased to $8,000 ($4,000 for separate tax filers).

Required repayment of credit (recapture) is WAIVED unless the residence is sold or ceases to be a principal residence within 36 months of purchase.

Congress recently extended the first-time home buyers credit to homes purchased before 12/01/09. The credit is refundable and is based on your filing status, the purchase price of the home, and if you qualify as a first-time buyer.

The credit:

• 10% of the purchase price plus certain closing costs that increase your tax basis. If a $400,000 home is purchased, the credit would be $40,000 (10% of $400,000). However, this is limited to a maximum of $8,000.
• The credit is refundable, the credit is just like withholding on your W-2 for 2009.  If you owe no taxes you receive it all.

Filing status:

• Married, Heads of Household and Single taxpayers are eligible for a credit for up to $8,000. Married persons filing separate returns are each eligible for a credit for up to $4,000.

Qualifying as a first-time homebuyer:

• To qualify, neither you nor your spouse can have owned and lived in a home as your primary residence for three years prior to purchase. So if you buy on May 1, 2009, neither of you can have owned nor lived in a primary residence from April 30, 2006 to May 1, 2009.

Home can not be purchased from a related party:

• The rules are very complicated on who is a related party to you. So, if the home is to be purchased from someone in your family or an entity that is controlled by your family, you should seek competent tax advice to see if this home will still qualify for the credit.

Recapture of credit:

• If you sell your new home or if either spouse ceases to use the house as their primary residence within three years of purchase, a large portion of any credit taken will be recaptured. In our above example, if the home is sold within three years, and an $8,000 credit was taken on your 2009 tax return, you will be required to repay most of the $8,000 credit.

Buy a Home Now and Get Your Refund NOW!