2008 & 2009 Home Purchases
If you have been saving to buy a house and you are a first-time homebuyer, now may be the time for you to seriously start looking into buying that home. The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the new purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

Originally introduced in 2008, the American Recovery and Reinvestment Act of 2009 (ARRA) expands the first-time homebuyer credit offered by the 2008 law—it not only covers purchases made before December 1, 2009, but now the repayment stipulations have changed to further benefit the buyer.

The initial law offered a credit that would be paid back over a 15 year period (or sooner if the home was sold). However, the ARRA of 2009 now allows qualified taxpayers to take the credit and not have to pay it back. Basically, this incentive is offered to help stimulate the slumping housing economy. So, if you are thinking seriously about buying a home and taking advantage of this credit, you might be aware of a few key components of ARRA fine print:

1. The credit applies to home purchases that close after April 8, 2008 and before Dec. 1, 2009.

2. The credit is 10 percent of the purchase price of the home, up to $7,500 for 2008 and $8,000 for 2009.

3. You may not be eligible for the credit. If your Modified Adjusted Gross Income is greater than $75,000 for single filers and $150,000 for married filing jointly, you may be phased out of the credit. Simply put, single filers who have an MAGI over $95,000 and Married Filing Jointly over $195,000 are not eligible for the credit. If your MAGI falls somewhere between these amounts you will be entitled to part of the credit. We can help you determine these amounts.

4. The credit is refundable; that is, if you owe no tax, you are still eligible to take the credit.

5. Vacation and rental properties do not qualify for the credit.

6. The obligation to repay the credit on a home purchased in 2009 arises only if the home ceases to be your principal residence within 3 years from the date of purchase. The full amount of the credit received becomes due on the return for the year the home ceased being your principal residence. This is to discourage “flipping” properties and taking the credit.

There are other scenarios to be aware of, and the IRS offers an informative link at:

Please let us know if you are considering purchasing a home before December 1, 2009 or if you have purchased a home after April 8, 2008. We can set up a meeting to go through your 2008 & 2009 income and determine if the credit will work for you.

The next blog entry will discuss COBRA and how the Act has made some important reductions in premiums for eligible individuals.