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Understanding the 2009 First Time Home Buyers Tax Credit
In February of 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 into law.
The American Recovery and Reinvestment Act of 2009 is heavily based on suggestions made by President Obama that are intended to help stimulate our economy.
There are many parts of this $787 Billion spending program, including $288 Billion in tax relief. The bulk of this tax relief ($237 Billion) is intended for private individuals and the remainder($51 Billion) is offered to companies. A substantial amount of money was also set aside for healthcare, energy, education, and improving our countries infrastructure.
The tax relief for individuals is intended to help reduce payroll taxes, increase the limit of the Alternative minimum tax, offer more tax credits fro children, and help reduce taxes for those who pay college tuition. There are also provisions to offer tax credits for improving a homes energy efficiency, as well allowing taxpayers to deduct the sales tax from new vehicle purchases.
The Federal Government has also set aside $6.6 billion towards a tax credit for first time home buyers.
The 2009 Tax Credit Explained
The First Time Home Buyers Tax Credit is based off of %10 of the price of a new home, with a limit set at $8,000. This tax credit can be used towards the purchase of a new home, manufactured home, condominium, mobile home, house boat, and single family home, as well as towards the construction of a new home.
This $8,000 tax credit will not need to be repaid and can be claimed even by those who do not pay income taxes. There are, however, several requirements that the homeowner must meet:
- The home must have been purchased between January 01, 2009 and December 01, 2009.
- The homeowner, as well as their spouse, can not have owned a primary residence in the last 3 years.
- An income limit of $75,000 or $150,000 is placed on single homeowners and married homeowners respectively.
- Once the tax credit is received, the homeowner must live in the home for at least 3 years. If the home is sold or the taxpayer stops living in the home, the tax credit will need to be repaid. However, in the case of death or divorce, some exceptions may be made.
- The home can not be a gift, nor can it have been purchased from a relative or other family member, including husbands or wives.
- The taxpayer must be a legal citizen, but some exceptions may be made in this regard for those that are in the country legally.
The 2009 First time home buyers tax credit can be claimed on a taxpayers 2008 or 2009 income tax return. If an individual has already filed their 2008 taxes, an amended return can be submitted, which will allow the individual to receive the tax credit check within 4 to 8 weeks.
Homes Purchased in 2008
People who purchased a home in 2008 can also receive a tax credit. For homes purchased between April 8, 2008, and before July 1, 2009, $7,500 is offered as a no interest loan.
Most of the same restrictions apply to the 2008 tax credit, but unlike the 2009 tax credit, the 2008 tax credit needs to be repaid.
The 2008 First-time Homebuyers incentive was offered as part of the The Housing and Economic Recovery Act of 2008. It will need to be repaid in 15 equal payments that begin in 2010.
Letting the Current Hosing Market Work for You
Both of these first time homebuyers tax credits can make owning a home much more affordable. They can be used to increase equity in the home, make improvements, pay bills, reduce mortgage payments, or for whatever the homeowner needs. Since it is possible to file an amended tax return, this tax credit can also quickly offer financial assistance to new homeowners.
Hopefully, new homeowners will be able to use this tax incentive to take advantage of today's low interest rates and historically low home prices.