First Time Homebuyer Tax Credit Ends November 30, 2009

The First Time Homebuyer Tax Credit was substantially revised in 2009.  Unlike the 2008 credit which must be repaid over 15 years, the 2009 credit does not have to be repaid.  Further, the maximum credit was increased from $7,500 to $8,000.  However, the credit expires on November 30, 2009.  Time is therefore of the essence as the purchase closing must be on or before that date.  For a newly constructed home, the purchase date is considered to be the move-in date.  A first-time homebuyer is defined to be someone who has not owned a principal residence in the USA during the three-year period ending on the date of purchase of the home qualifying for the credit.  If you are married, both spouses must pass the three-year test.  The amount of the credit is phased out for modified adjusted gross income of unmarried individuals between $75,000 and $95,000; and of married joint tax return filers between $150,000 and $170,000.  An election is available to claim the 2009 credit on the 2008 tax return.  Therefore, you have the option of choosing between 2008 or 2009 which can provide important flexibility as to the timing of receipt of the credit and as to qualifying for the credit if modified adjusted gross income is too high in one year or the other.  The credit must be repaid if the residence is sold or is no longer used as the principal residence during the 36-month period from the date of purchase (or the 15-year period for the 2008 credit).

UPDATE:  The Worker, Homeownership, and Business Assistance Act of 2009, signed into law on November 6, 2009, generally extends the credit until April 30, 2010.  The credit has also been made available to more people and certain anti-fraud provisions have been implemented.