The National Association of Realtors is recommending completing transactions involving the First-Time Home Buyer Tax Credit as soon as possible. The Tax Credit was increased to $8000 for home purchases made in 2009 before December 1, 2009. The NAR’s recommendation is due to uncertainty whether the program will be reauthorized before the December 1, 2009 expiration. Other issues, specifically health insurance, are expected to dominate House and Senate activity, reducing the likelihood of reauthorization before December 1.
Unlike the credit created through the Housing and Economic Recovery Act of 2008, the American Recovery and Reinvestment Act of 2009 does not require the credit be paid back as long as the home remains the taxpayer’s main residence for at least three years following the purchase.
The credit is 10 percent of the purchase price of the home, with a maximum available credit of $8000 for homes purchased in 2009 (prior to December 1, 2009). The credit is available for any home purchased after April 8, 2008 and before December 1, 2009 (maximum credit of $7500 for homes purchased in 2008). For new construction, the purchase date is considered to be the first day the home is occupied.
Taxpayers (and their spouse) who have not owned a principle residence in the three years prior to the home purchase are eligible for the credit. Vacation homes and rental properties do not qualify.
The credit is reduced or eliminated for higher-income taxpayers.
All individuals are well advised to consult with a tax advisor or legal professional regarding their personal situation before making any decisions or taking action.