Homebuyer Tax Credit Up To $8,000.00

It is presently a great time for homebuyers to purchase a home.  In addition to the low prices and low interest rates, the federal government is offering a tax credit up to $8,000 for first-time homebuyers.  On February 17, 2009, President Barack Obama signed into law a $787 billion economic stimulus package called the American Recovery and Reinvestment Act of 2009.  The major housing stimulus provision of the Recovery Act is the first-time homebuyer tax credit.

A first-time homebuyer may receive a refundable tax credit up to $8,000 for purchasing a principal residence in the U.S. from January1, 2009 to November 30, 2009.  No repayment is required if the buyer owns and occupies the property for 36 months.  This tax credit provides an incentive for first-time homebuyers to purchase homes.  Once the word is out, I think the new homebuyers will jump on board and hopefully it will spur our economy.  I hope this will start to happen by early summer.

A tax credit is a dollar for dollar reduction of tax owed.  This is much better than a tax deduction which is merely a reduction of taxable income.  For the purposes of the $8,000 tax credit, a first-time homebuyer is defined as any individual with no present ownership interest  in a principal residence during the 3 year period ending on the date of the purchase of the principal residence to which the tax credit applies.

The maximum tax credit for an individual first-time homebuyer is 10 percent of the purchase price, not to exceed $8,000.  For married individuals filing separate tax returns, the tax credit is capped at $4,000.  The tax credit may be reduced by the taxpayer's income.  The tax credit starts to phase out for an individual taxpayer with a modified adjusted gross income from $75,001 to $95,000 (or $150,001 to $170,000 for joint filers).  The tax credit is eliminated entirely if an individual's modified adjusted gross income is over $95,000 (or $170,000 for joint filers).

It is important that you talk with you tax consultant regarding this matter concerning your own personal situation prior to entering into an agreement to purchase a home.

Harold Avent, CRS, CRB, GRI, e-PRO

RE/MAX Execs

www.HaroldAvent.com

Harold@HaroldAvent.com