One of the main features of the American Recovery and Reinvestment Act is the refundable first time homebuyer's tax credit of up to $8,000. It is planned in such a way that it gives a boost to the slumped housing market.
So, who are the first time homebuyers?
A first time homebuyer is a person who hasn't owned a property in the past 3 years.
Who all are eligible for first time homebuyers tax credit?
- First time homebuyer’s tax credit is available on those homes which are purchased between January 1, 2009 and December 1, 2009.
- Homebuyers will get a tax credit up to 10% of the purchase price up to a maximum of $8,000.
- People with adjusted gross income of $75,000 or above (for single) and combined adjusted gross income of $150,000 or above (for couples) will not get this benefit.
Though you purchase the property in 2009, you will be able to get the benefit of tax credit on 2008 taxes.
How can you take advantage of this tax credit?
In order to take advantage of the tax credit, homebuyers can close on their homes before April 15, 2009 or they may even get an extension to file taxes later in the year. Moreover, homeowners can also go for filing an amended return. There are some state housing programs which will allow the homebuyers to access the money from tax credit at closing.
Do you have to pay back the tax credit?
If you sell off your property within 3 years, then you will have to pay back the tax credit. Otherwise, you are not required to pay it back. This is an improvement upon the previous tax credit passed on 2008 wherein it would have to be paid back over a period of 15 years.
In my opinion, the best aspect of the tax credit for first time homebuyers is the provision of allowing them to claim the tax credit immediately. This is a positive step in the right direction. It is expected that due to this tax credit, around 300,000 additional homes will be purchased in 2009. Let's hope that this tax credit benefits a large number of people.