The Economic Stimulus Bill
President Obama signed the $787 billion economic stimulus plan into law today during a ceremony in Denver. Was there anything in the stimulus package that might help the San Diego Housing Market? Well, it just might stimulate some renters into becoming homeowners.
The one component in the stimulus package that directly affects the housing market is the “so-called” First-Time Homebuyer Refundable Tax Credit. It’s important to know that the tax credit may apply to you even it it’s NOT your first home! If you haven’t owned a home in three years - keep reading…
What’s a refundable tax credit? When you file your taxes, the amount of the credit is subtracted from the taxes you owed. You are entitled to the entire credit, even if it is more than you owed in taxes. Whether you will receive a check from the IRS depends on the amount of tax withheld over the year. (Example: If you owed $6,000 in taxes, had $6,500 in withholdings, you would normally receive a tax refund of $500. With the $8,000 tax credit, you would receive an IRS refund of $8,500.)
How much is the credit? It’s 10% of the purchase price up to a maximum of $8,000. So the purchase of any residence over $80,000, will qualify for the full $8,000 credit.
Do I have to pay this back? IF you sell the property in less than THREE years, you must pay the credit back when the home sells. IF you keep the property for longer than three years, you DO NOT have to pay this back. (This is a MAJOR change from the The First Time Homebuyers Credit passed last July which was more like a 15 year loan with no interest.)
Who can claim the tax credit? There are two criteria you must meet to claim this.
- You may not have owned a single family residence for the last three years. For married couples - neither spouse may have owned a single family residence.
- There is an income limit. For individuals, the credit phases out for gross incomes between $75,000 and $95,000. For those filing joint returns it will phase out for incomes between $150,000 and $170,000. (Phasing out means the total credit declines gradually (linearly) from the full credit to zero between those limits.)
What types of homes qualify for the tax credit? Any single family U.S. residence that is used as a principal residence qualifies. It can be attached or detached.
How long is the credit available? The program applies to any home purchase where the closing date is between January first and December first of 2009. So if you’ve already purchased a home and your closing date was in 2009, this transaction would be eligible if all the other criteria are also met. If you qualify for this credit, be careful to choose a closing date that doesn’t fall to close to the cutoff date of December 1, 2009! Closing dates can slip, and that would be an terrible loss!
How do I get the credit? You simply the credit when you file your taxes for the 2009 tax year.