In 2008 Congress created a $7,500 First-Time Homebuyer Tax Credit for individuals making up to $75,000 and couples making up to $150,000. The first time home buyer credit went into effect April 8, 2008 and was set to expire July 1, 2009. The big problem was that the credit had to be repaid over 15 years. People viewed it as a debt and not a benefit.

Immediately following the issuance of the tax credit, The National Association of Realtors began advocating to remove the repayment feature of the credit, extend the credit to the end of 2009 and to make the credit available to every home buyer.

The government, working with Realtors® across the country, enacted the new 2009 first time home buyer credit and removed the repayment requirement for 2009 purchases. The credit is still repayable for 2008 purchases. The new credit has been extended to on or before November 30, 2009 and can be claimed by those who closed on homes on or after January 1, 2009 and has also been expanded to $8,000 (Or up to 10% of the purchase price, whichever is less). Unfortunately, the credit is still only for first time homebuyers. A first time home buyer is defined as someone who did not own another main home at any time during the three years prior to the date of their new purchase. CHICK HERE for a comparison of the 2008 credit versus 2009 credit.

In conclusion, the new credit is greatly improved compared to the old credit. It is a true credit and does not need to be repaid as long as you occupy the home for 3 years.  The NAR estimates that hundreds of thousands of potential buyers will take advantage of the credit.

For more info on the credit and the 2009 Stimulus legislation, CLICK HERE or consult a tax advisor. If you have real estate related questions, contact me.

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