HouseThe federal government established the first-time homebuyer credit in 2008 and gave new homebuyers a $7,500 credit that was, in effect, a no interest loan they had to repay over the next 15 years, according to the Internal Revenue Service Web site. In late February, the credit was amended, and is essentially now “free money” that does not have to be repaid. The tax credit, combined with an abundance of attractive homes on the market, make it a great time to buy a home!  Here is your home buyer tax credit fact sheet:

Home Buyer Tax Credit Defined

  • A $8,000 tax credit available for first-time home buyers only.
  • The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the home purchase.
  • All U.S. citizens who file taxes are eligible to participate.

Payback Provisions

  • The tax credit is a true credit.
  • The only repayment requirement is if the home owner sells the home within three-years after the purchase.

Income Limits

  • Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 credit if their modified adjusted gross income (MAGI) is less than $75,000. Those earning between $75K and $95K are eligible to receive a partial first-time home buyer tax credit.
  • For married couples filing a joint return, the income limit doubles to $150,000. Those couples earning between $150K and $170K are eligible to receive a partial first-time home buyer tax credit.

Effective Dates

  • To qualify, first-time home buyers must close on the sale of the home between January 1, 2009 and November 30, 2009.

Refundable Credit

  • A “refundable credit” means that if you pay less than $8,000 in federal income taxes, the government will write you a check for the difference. For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 tax refund from the government, your refund would grow to $9,000 ($1,000 plus $8,000 from home buyer tax credit.)
  • Buyers can take the tax credit on their 2008 or 2009 income tax return.

Qualifying Homes

  • All homes, whether single-family, town homes or condominium apartments will qualify, provided that the home will be used as the principal residence and the buyer has not owned a principal residence in the prior three years.
  • Newly-constructed homes do qualify.

For more information, contact your local real estate agent. Free BuyBaltimore 101 Classes available at www.buybaltimore.com.

Julie Gochar (Obsidian Realty, 410.241.7708) and Steve Murphy (PC, 443.627.2910) are both licensed realtors and team leaders in the Baltimore City market with over 16 years of collective experience in real estate sales and branch management.