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First-time Homebuyer Credit

The American Recovery and Reinvestment Act of 2009 increased the maximum refundable credit from $7,500 to $8,000 and removed the repayment provision.

The revised credit allows first-time homebuyers a tax credit equal to the lesser of $8,000 ($4,000 if married filing separately) or ten percent of the purchase price of a home. A “first-time homebuyer” is an individual who had no present ownership interest in a principal residence for the three years preceding the purchase of the new home. If the individual is married, his or her spouse must also meet the definition of a first-time homebuyer.

The credit is phased out for taxpayers with modified adjusted gross income between $75,000 and $95,000 ($150,000 and $170,000 for joint filers). Please note that purchases from a related party will not qualify for the credit.

This credit is available for houses purchased between January 1, 2009 and November 30, 2009.

The "Worker, Homeownership, and Business Assistance Act of 2009" extended the first-time homebuyer credit into 2010. The same qualifying provisions still apply. Homes purchased (closing completed) before May 1, 2010 or homes with a binding contract before May 1, 2010 and closed before July1, 2010 qualify for the first-time homebuyer credit.

This new legislation also provides a credit to existing homeowners who are purchasing another house. The credit is 10% of the purchase price, up to a maximun credit of $6,500. To qualify homeowners must have owned the same principal residence for any five consecutive years during the eight-year period ending on the date of purchase.

Related IRS Publications: 544, 550, and 551.