First-Time Homebuyer Tax Credit

What does the new law mean to the first- time home buyer?

The new law raises the current maximum amount from $7,500 first-time homebuyer tax credit to $8,000, and extends it through November 30, 2009. The great part is that it also eliminates any required repayment if the home owner lives in this home for 36months or 3 years.

These rules apply to purchases of a principal residence by a first-time home buyer after December 31, 2008. For those who purchased on or after April 9, 2008, and before January 1, 2009, the original first-time homebuyer credit enacted last year rules will be applied.

The credit is subject to phase-outs that start for taxpayers with AGI (adjusted gross income) in excess of $75,000 ($150,000 for joint filers) continue to apply to both years.

The effective date for the new law’s no pay-back provision is keyed to “residences purchased after December 31, 2008.” Please note that under these rules a purchase takes place when title passes and not when a contract of sale is executed.

The Senate’s proposal for raising the credit to $15,000 and making it applicable to all home purchasers regardless of income level was rejected during conference negotiations.