The First Time Home Buyer Tax Credit Explained
by John Guptill
I was away on vacation about two weeks ago and readjusting and trying to catch up last week. After coming to, I’ve found about 50 sort of lower priority e-mails I hadn’t yet gotten to. About 49 of them had to do with the First Time Home Buyer Tax Credit, the other one told me it was time to renew my domain name. Do not fear, the domain name has been renewed, so now it’s time to address the remaining 49.
I have had a lot of questions about this as well from clients and friends, so here is my attempt to sum it all up and lay it on the line. I would do bullet points, but I don’t know how.
This is my understanding:
There is a 2008 Version and a 2009 Version of the First Time Home Buyer Tax Credit. They are similar but diverse in several key elements.
Those who purchased on or after April 9th, 2008 through December 31st, 2008 are eligible for the 2008 Version. Those who purchase from January 1st, 2009 through November 30th, 2009 are eligible for the 2009 Version. There has been widespread misunderstanding that 2008 purchasers now qualify for the 2009 version, this is not the case.
In both versions, First Time Home Buyer is defined as someone who has not had any ownership interest in a home within 3 years prior to the purchase date of the eligible Primary Residence. For those of you who are close to that 3 year mark, keep this in mind when selecting your closing date, you can still put a property under contract as long as you close after three years from the sale of your last home.
In both versions, Primary Residence is defined as an owner occupied US residence where the owner spends more than 50% of their time. So, should your significant other, friend, family member, business associate, etc. own a vacation home or should they or you rent such a place where you spend 49.9% of your time, a) I am jealous, b) as long as you spend the other 50.1%in your home, it is eligible.
In both versions, as the title would suggest, it is a Tax Credit, not a tax refund. Even should you owe less than the credit you qualify for, you will receive a check for the remainder.
The 2008 version is a $7,500* tax credit for eligible first time home buyers purchasing a primary residence. It was enacted in July of 2008 and was intended to apply to purchases from April 9th, 2008 through July, 1st 2009.
*The credit is the lesser of $7,500 or 10% the cost of the home. Therefore eligible purchasers of homes greater than or equal to $75,000 would receive the $7,500 credit and those purchasing below $75,000 would receive 10% of the purchase price.
The 2008 version is essentially an interest free loan. Starting with 2010 the credit is to be paid back over 15yrs at $500/yr and should one sell prior to complete repayment, any outstanding balance will be recaptured upon the sale.
In 2008 the National Association of Realtors, among others, began to lobby for an extension of the 2008 Version and elimination of the repayment clause among other factors. And you thought all we did was drive around in cars and open doors. Have a look at NAR’s Stimulus Plan.
In part what resulted was the 2009 Version. 
The 2009 version is an $8,000* tax credit for eligible first time home buyers purchasing a primary residence. It was enacted in February of 2009 and applies to purchases from January 1st, 2009 through November 30th, 2009.
*Again, the credit is the lesser of $8,000 or 10% of the cost of the home. Therefore eligible purchasers of homes greater than or equal to $80,000 would receive the $8,000 credit and those purchasing below $80,000 would receive 10% of the purchase price.
The 2009 version is only repaid should one resell within three years of purchase! Should this be the case the entire credit is recaptured.
Of course, there are nuances, such as income requirements, some limitations on financing, etc… so I recommend you seek additional information from an accountant or tax attorney, but also, please refer to NAR’s Tax Credit Presentation, NAR’s Tax Credit FAQs and NAR’s Tax Credit Chart. There are also some additional benefits and opportunities within the complete stimulus package as outlined in the REALTOR® Magazine article Stimulus Advances With Tax Credit Changes.
Overall both of these represent great programs. 2008 purchasers, remember that the value of the credit now is greater than the cost of paying it off. Due to inflation, over time the amount you are paying back is less in value than credit you’ll receive now. For those of you considering purchasing, this is a historic opportunity, don’t let it pass.
Feel free to contact me should you have any questions, 207 650 0750 or john@mainerealestateservices.com.
Oh, and by the way, I am never to busy to assist you, your family, friends and colleagues with any real estate needs!
Contact Allen & Selig Realty Today
207.829.3339
Or Visit us On the Web:
