Okay, so despite Josh and my best efforts, we only had 6 people answer our poll through twitter. Therefore, this is by no means a large sampling fit to discern the efficacy of the tax credit, but I liked the headline–Catchy isn’t it? Of those who voted, 4 said it would incent them and 2 said it would not. Hey, if you are clicking through to the poll–feel free to vote. Maybe I can do a follow up with more data down the road. For now however, I will go into the nuts and bolts of the new $8,000 tax credit. This is not to be confused with the $7500 “tax credit” from last year.
A tax credit of up to $8,000 or 10% of the purchase price (whichever is least) for 1st time home buyers 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. The question is will it? According to Lawrence Yun, chief economist for the National Association of REALTORS®, 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.
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 home 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.
(Image Courtesy of Arizona Mortgage News)