Yesterday, President Obama signed into law the American Recovery and Reinvestment Act (ARRA). There is important news for future homebuyers included in this legislation: an $8,000 home buyer tax credit (also known as a housing tax credit) available to first time buyers!
Here are some important details of the home buyer tax credit included in the ARRA:
1. This tax credit is only available to first time buyers. The law defines a first-time buyer as someone who has not owned, or been included on title to, a property in the last three years. All home buyers who will be on title need to be first time buyers (for married couples BOTH spouses must qualify as first-time buyers).
2. Both resident and non-resident aliens who are not U.S. citizens can qualify for this tax credit.
3. The house must be purchased between January 1, 2009 and December 1, 2009.
4. The tax credit is actually calculated as 10% of the purchase price of the home, up to a maximum of $8,000.00. To qualify for the full $8,000 – the property price must exceed $80,000.00
5. There are income limits on this tax credit. First-time buyers with gross annual income of $75,000 or less will qualify for the full benefit. The credit is scaled (reduced) for gross individual incomes between $75,001 and $95,000, and individual home buyers with gross incomes greater than $95,000 cannot claim any of the tax credit. Married taxpayers will qualify for the full benefit with incomes less than $150,000. The credit is reduced for incomes between $150,000 and $170,000 and reduces to zero for gross household incomes in excess of $170,000.
6. This is a refundable tax credit – not a tax deduction. First-time buyers that meet all criteria can deduct the full $8,000 from their federal income tax owed. A refundable tax credit means that if you owe less than $8,000 in federal income tax, you can actually get a REFUND for the balance.
7. DOES NOT NEED TO BE REPAID. The biggest difference between the Home Buyer Tax Credit included in the ARRA and last year’s Employment and Economic Stability Act is the fact that this tax credit does not need to be repaid! The housing tax credit in 2008 was basically an interest-free loan to first-time buyers that needed to be repaid in 15 years. THIS home buyer tax credit does NOT have to be repaid to the federal government.
The Minnesota Home Ownership Center is in the process of creating a printable FACT SHEET with this, and other, information regarding the Home Buyer Tax Credit. As soon as that becomes available, information will be posted on the Center’s website at www.hocmn.org and this blog.
Is homeownership right for you? Will this tax credit help you purchase your first home?? The Minnesota Home Ownership Center's HOME STRETCH Counselors can set up an appointment to discuss if NOW is the right time for YOU to begin your home buying process.