Davemuti’s Weblog

Home Buyer Tax Credit – Not just for First-Time Buyers  

On July 30, 2008 President Bush signed into law H.R. 3221, the Housing and Economic Recovery Act of 2008.  Part of this law includes a Tax Credit up to $7,500 for “first-time” home buyers.  One of the many misunderstood benefits of this program is that a “first-time” home buyer is defined as one who has never owned a principal residence or one that has not owned a principal residence within the last three years of the purchase date.   This second part of the definition is not widely known and if you or one of your clients has not owned a home for the past 3 years or longer they too may be eligible for this Tax Credit. 
 
Of course there are certain limitations and I have highlighted just a few of them here:

• The closing must occur between April 9, 2008 and July 1, 2009
• The credit is equal to 10% of the purchase price up to a maximum of $7,500
• This is a credit that must be paid back over a 15 year period beginning after the second year of the deduction is claimed ($500/year or 6.5% of the credit)
  Income phase out limitations of $75,000/individual and $150,000/couple
• Even if you purchase the house in 2009 you may be able to claim the credit on your 2008 return
• If you sell the house at a loss you will owe nothing

To read a well drafted overview of the bill, please click on this link or this link for a break down of some income examples.