In an effort to help motivate homebuyers and to get the economy back on track, Congress has recently enacted legislation to provide a tax credit to buyers. Although the new tax credit is restricted to those who are purchasing a home for the first time and is only valid on purchases made between January 1, 2009 and December 1, 2009, the new credit can reward buyers with up to $8,000 in credit. In addition, unlike previous tax credits that have been provided to homebuyers, the new credit does not need to be repaid over time.
In order to qualify for the new tax credit, homebuyers must meet certain criteria. First, the person purchasing the home must be a first-time homebuyer. According to the legislation, a first-time homebuyer is defined as someone who has not been the owner of a principal residence for a period of three years prior to making the purchase. There are also income restrictions placed on who can receive the credit, with the credit being only available to single taxpayers who have an income of up to $75,000 and married taxpayers with an income of up to $150,000.
The actual amount of the credit the homebuyer receives is based upon the purchase price of the home, with the amount of the credit being equivalent to 10% of the price. There is, however, an $8,000 limit on the amount that can be credited to the homebuyer. Therefore, if the purchase price of the home is more than $80,000, the homebuyer cannot receive more than $8,000 in tax credits.
Under the new tax law, any property that can be used as a primary residence is eligible for the tax credit. This includes, but is not limited to:
- Single-Family Detached Homes
- Townhouses
- Condominiums
- Manufactured Homes
- Houseboats
Newly constructed homes are also eligible for the tax credit. If the newly constructed home is purchased from a home builder, the settlement date must be between January 1, 2009 and December 1, 2009 in order to be eligible for the credit. Buyers who construct a home on a property they previously owned, on the other hand, are still eligible for the credit if the date they occupied the home was on or after January 1, 2009 or was before December 1, 2009.
Although the new legislation is different from previous legislation because the credit does not need to be repaid, it is important to note that the homebuyer must utilize the property as his or her primary residence for at least three years after making the purchase. Otherwise, it is possible that the credit will need to be repaid.
Eric Bramlett is the broker & co-owner of One Source Realty, a boutique Austin real estate firm. Eric has been a full time real estate professional since 2003. He currently guest blogs in a number of locations, and writes for his Austin real estate blog consistently.
