By now you’ve probably heard about the first time buyer credit, also known as the American Recovery & Reinvestment Act of 2009.  First-time buyer credit has a nicer ring to it, doesn’t it?

Here’s the nickel tour of the plan – first-time home buyers, who purchase their home within January 1 2009 and November 30 2009, are eligible to receive a tax credit of up to $8000.  That tax credit can be applied to their 2009 taxes.  In the last few days there’s been talk that the credit can be applied as a down payment at closing, and while there are all kinds of sites that right now are saying “yes you can”, hold tight – the lenders I’ve talked to locally are saying not so fast, they’re waiting on more details.

With all that said, the Virginia Association of REALTORs has put out a helpful PDF entitled “What You Should Know About the First-Time Homebuyer Tax Credit“, and I wanted to share it here – it’s a simple, straightforward explanation of what the credit is all about:

• The temporary credit is only available for home purchases made from January 1 2009 to before December 1 2009 and is equal to 10% of the cost of the home, up to a maximum credit of $8000. (For example, a home purchased for $80000 or more would qualify for the full $8000 credit, while a $70000 home would qualify for only 10%, or $7000.)
• Buyers claim the credit on their federal tax return to reduce their tax liability.  If the credit is more than their total tax liability that year, the buyer will receive a refund check for the balance.
• Only first-time homebuyers can take advantage of the tax credit.  A first-time buyer is defined under the tax credit as an individual who has not owned a home in the last three years.  For married joint filers, both must meet the first-time homebuyer test to take the credit on a joint return.
• Eligible properties include anything that will be used as a principal single-family residence – including condos and townhouses.
• There are income guidelines on the credit.  Individuals with an adjusted gross income up to $75000 (or $150000 if filing jointly) are eligible for the full tax credit.  The credit is phased down for those earning more and is not available for those with an income above $95000 (or $170000 if filing jointly).
• The new tax credit does not have to be repaid if the buyer stays in the home at least three years.  If the home is sold before that, the entire amount of the credit is recaptured on the sale.
• People who purchased homes under the 2008 $7500 tax credit program will still be required to repay that credit to the government over a 15-year period.

FULL Disclosure:  I am not a tax advisor, nor do I play one on TV.  Consult with a tax advisor to learn more.

I am, however, a REALTOR.  Just so we’re clear.