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Enhanced first-time homebuyer credit in the American Recovery and Reinvestment Act of 2009(MS Word)
Enhanced first-time homebuyer credit in the American Recovery and Reinvestment Act of 2009(.pdf)
Enhanced first-time homebuyer credit in the American Recovery and
Reinvestment Act of 2009
Dear Reader,
In hopes of spurring the housing industry, the recently enacted
“American Recovery and Reinvestment Act of 2009” includes an
enhanced tax credit for first-time homebuyers. Here are the details.
You may remember that last year's Housing Act included a tax credit
giving first-time homebuyers up to a $7,500 (actually, $7,500 or 10%
of the purchase price, whichever is less) credit for buying a home
between April 8, 2008, and July 1, 2009, with single taxpayers with
incomes up to $75,000 and married couples with incomes up to
$150,000 qualifying for the full tax credit. However, despite high
hopes that the credit would be effective in getting people to buy
homes and thereby reduce the excessive inventory on the market, the
credit is widely acknowledged to have failed in its objective. The
problem, according to realtors and industry officials, was that
buyers were turned off by the odd way the credit worked. While the
credit functioned initially like other tax credits, reducing a
person's tax liability on a dollar-for-dollar basis, it was unusual
in that, unlike other federal tax credits (for example, the child
credit), the credit for first-time homebuyers had to be paid back to
the government ratably over a period of 15 years (or earlier if the
house is sold). So, as a practical matter, the credit was the
equivalent of an interest-free loan from the government. It was the
payback requirement that many in the industry felt kept potential
buyers on the sidelines. Now, Congress has beefed up the credit in
renewed optimism of enticing more first-time homebuyers to take the
plunge. First and foremost, the new legislation scuttles the
repayment requirement for homes purchased on or after January 1,
2009. The new law also extends the credit through the end of
November 2009, and bumps up the maximum credit amount from $7,500 to
$8,000. However, the new law retains the recapture provisions if the
house is sold within three years of purchase.
I hope this information is helpful. If you would like more details
about this or any other aspect of the new law, please do not
hesitate to call.