First-Time Home Buyer Credit Information

A lot of information has been circulated over the past few months regarding President Obama's stimulus package with regards to housing. Many people are aware there is a tax credit of up to $8,000 but what about all of the other nitty gritty details? What does this all mean? The article below, by Jonathan Boatwright of Realty Austin, is a great summary of everything you need to know if you are interested in purchasing your first home between now and December 1, 2009.

First-Time Home buyer Credit of Up to $8,000
Qualified first-time home buyers who purchase a home in 2009 before December 1, 2009 will receive a tax credit of up to 10% of the purchase price (up to $8,000). Home buyers can claim the credit on their income taxes and receive money back in excess of taxes. For example, if you are owed a refund of $1,000, you could now receive up to $9,000 back.

Program details:

• The credit does not have to be repaid, provided the home is owned for more than three years.
• To be considered a first-time home buyer, the purchaser (and spouse) must not have owned a home for three years prior to home purchase.
• The home must be the purchaser’s primary residence; only single family homes qualify.
• Full credit will be issued to individuals with an adjusted gross income of no more than $75,000 ($150,000 on a joint return). Individuals with incomes over $95,000 ($170,000 on a joint return) will not receive the credit.
• The new credit may be combined with state/local revenue bond money to help finance the home purchase.

Tax Credit for Energy Efficient Home Improvements:
The tax credit is now 30% of the cost of the improvements (up to $1,500). Eligible improvements include insulation, central A/C units, heat pumps, water heaters and energy efficient exterior doors and windows.

FHA, Fannie Mae and Freddie Mac Loan Limits:
The new law reinstates 2008’s loan limits for FHA, Fannie Mae and Freddie Mac through December 31, 2009. The limits were equal to the greater of 125% of the local area median home price, or $271,050 for FHA and $417,000 for Fannie and Freddie (overall maximum cap of $729,750). In some areas where the limits were higher, the higher limits will apply.

Tax Relief and Benefits for Families:
A payroll tax credit will provide up to $400 per worker ($800 per couple filing jointly). The credit phases out at $200,000 for couples filing jointly and $100,000 for single taxpayers.

• A new (partially refundable) tax credit offers a maximum of $2,500 toward college tuition and related expenses for 2009 and 2010.
• Unemployed Americans can now claim up to 33 weeks of benefits through December 2009. Benefits will be increased by $25 a week, while the first $2,400 received will be exempt from federal taxes.
• Laid-off workers who buy into their former employer’s health insurance through the COBRA program will receive a 65% subsidy on premiums for up to nine months.