One of the more well-publicized provisions in the American Recovery and Reinvestment Act of 2009 is an expansion and liberalization of the First-Time Homebuyer Credit.
The new tax credit should provide real assistance for qualifying homebuyers in reaching their goal of home ownership. It also provides an adrenaline shot for the central and south Texas real estate market.
Under prior law, qualifying first-time homebuyers received an IRS tax credit upon the purchase of a new home, essentially getting an interest-free loan.
Now for the tricky part.
After three years, that credit had to be repaid, with no interest and over a 15-year period.
Helpful? Possibly.
Confusing? You bet – especially when you factor in scenarios where the home is sold before the 15-year payback period.
The new version of the credit, though, is much more taxpayer-friendly. Under the new law, a first-time homebuyer qualifies for a tax credit equal to 10 percent of the purchase price on the home, up to a maximum credit of $8,000. Also, there is no repayment of the credit – ever!
If a first-time homebuyer buys a house for $75,000, the credit is $7,500. On a house worth $90,000, the credit can only reach the $8,000 ceiling.
Anyone who has not owned a home in the past three years qualifies as a first-time homebuyer. The IRS says the deadline to qualify for this credit is December 1, 2009.
For first time buyers, the IRS also allows an amendment on their 2008 returns to claim the credit. Even though the house was purchased in 2009, the home owner can immediately get the credit.
Our firm helps customers amend their taxes and complete all forms needed to obtain this credit.
--Dan Musick
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