First-Time Homebuyer Tax Credit

The new stimulus law, the American Recovery and Reinvestment Act of 2009, changed the first-time homebuyer tax credit. Gone is the 15-year recapture, which rendered the old credit somewhat useless. Now there is no recapture unless the home ceases to be the taxpayer’s or spouse’s principal residence within 3 years. The credit of 10% of the purchase price (maximum of $8,000) is a dollar-for dollar reduction in federal income taxes. If the credit is larger than the tax liability, the rest simply paid to the first-time homebuyer as a “tax refund”. Either way, the government is essentially giving the first-time homebuyer cash of 10% of the purchase price of the new home. This is a huge benefit, and I highly recommend claiming the credit. The home purchase must close before December 1, 2009. Even better, if you buy the home in 2009, you can claim the tax credit on your 2008 tax return. This way you get the money much sooner