The First-Time Homebuyer Credit

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October 9, 2009

The First-Time Homebuyer Credit is one of the provisions of 2009's American Recovery and Reinvestment Act. The credit basically provides first-time homebuyers a big incentive to purchase a home in 2009.

Here are the most important details about the credit:1

• It's a credit on the purchase of a main (not vacation or rental) home within the U.S.
• The credit is available to individuals or couples that didn't own a home for three years.2
• The credit is for 10% of the purchase price of the home, up to $8,000.3
• The home must be purchased between 1/1/09 and 11/30/09.
• Since this is a credit, it directly reduces the federal income tax you have to pay. It's also refundable -- so you might get a refund even if you don't owe any tax!
• The credit phases out for higher-income taxpayers.
• In general, the credit does not need to be repaid, unless you move out of the home within the first 36 months of living in it.

In addition, you're allowed to claim the credit on either your 2008 or 2009 tax return, regardless of when the home was purchased. This will allow you to get the credit faster. You may also be able to offset your down payment or closing costs with an advance payment of the credit -- however, this advance payment may actually be a loan, so you are cautioned to review any arrangements carefully.

In September, the IRS announced that approximately 1.4 million people had taken advantage of the credit. There is also talk that the credit may be extended. If you want more information, let us know and we will be happy to walk you through the specifics.