The Homebuyer Tax Credit of 2009

In the new stimulus package President Obama signed into law, among other things, is a new version of the homebuyer tax credit for 2009. There are some very noteworthy improvements as compared to the 2008 credit.

The 2008 tax credit, which was part of the Housing and Economic Recovery Act, gave first-time hombuyers a $7,500 tax credit if they purchased a home between April 9, 2008 and June 30, 2009. The new tax credit, which is part of the American Recovery and Reinvestment Act of 2009, increases the tax credit to $8,000 and is for home purchases that take place between January 1, 2009 and November 30, 2009.

The 2008 tax credit was an interest free loan from the government which would be repaid in $500 installments over 15 years. The 2009 tax credit does not have to be repaid. There is no change to the first-time homebuyer requirement. To take advantage of the credit a homebuyer must not have owned a home in the last three years, with few exceptions.

The remaining provisions are essentially the same. The homebuyer must occupy the home as their primary residence for at least three years, with few exceptions. There is still a phase out of the tax credit for singles making more than $75,000 and married couples making more than $150,000 and no tax credit for singles making $95,000 and couples making $170,000.

The tax credit is just that, a credit. A tax credit differs from a tax deduction in a very significant way. A tax deduction is a reduction of the amount of income one pays taxes on. A tax credit is a dollar for dollar reduction of the tax owed. If the homebuyer owes less than $8,000 in taxes the homebuyer will receive the difference in a refund (i.e., If your tax bill is $4,000, you will now owe zero and receive a refund of $4,000).

The homebuyer tax credit is an amazing move on the part of the government to stimulate the housing market. This credit should provide more than enough incentive for aspiring homeowners sitting on the fence about buying a home. The mix of phenominally low interest rates, reduced home prices, home sellers and lenders willing to pay closing costs, and the huge tax credit make this the best time in 10 years to buy a home. Who do you know who could and should take advantage of this awesome opportunity? I would be honored if you would refer them to me. I can be reached on my mobile number at (619)994-1110 or by e-mail at Shawn@YourFavoriteLender.com.