Family Tax Credits in the American Recovery and Reinvestment Act of 2009: First-Time Home Buyer Credit

First-Time Home Buyer Credit

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First-time home buyers who purchase a principal residence between January 1 and December 1, 2009 are allowed a refundable tax credit equal to the lesser of $8,000 ($4,000 for married-filing-separate returns) or 10 percent of the purchase price. This is an increase of $500 from the 2008 credit amount, which still applies to purchases made between April 8 and December 31, 2008.

Under the law in effect for 2008 purchases, the credit was an interest-free loan that had to be paid back in installments over 15 years. For qualified purchases in 2009, repayment is waived for taxpayers who remain in their homes for at least three years.

The 2009 credit begins to phase out for taxpayers with adjusted gross income of $75,000 ($150,000 for joint filers) and is not available to those with an adjusted gross income of $95,000 ($170,000 for joint filers) or more.

Individuals will have the option of claiming the tax credit on either their 2008 return or their 2009 return. Taxpayers who complete their purchase before they file their 2008 returns (due April 15, 2009) or chose to file an amended return for 2008 after the purchase can take immediate advantage of the cash benefit of the credit rather than having to wait another year to claim it.