Wasilla, Palmer, Alaskan home buyers; here are the 6 things you need to know about the new $8000 tax credit

Last week I wrote about the home buyer tax credit being considered by the house and senate. While the $15,000 did not get approved, the house and senate did agree on an $8,000 tax credit. While $15,000 would have been better, $8000 will still be a big boost to those buyers who have not owned a home in the last 3 years. Here are the details of the tax credit that was part of the stimulus bill that the President signed into law yesterday. Here are six things you need to know about the freshly-enacted $8,000 first-time home buyer tax credit.  

1.  $8,000 for new buyers: The tax credit included in the economic stimulus legislation is much narrower than the $15,000.00 proposal.  This credit is equivalent to 10 percent of the purchase price of the home–although it’s capped at $8,000 and applies only to first-time home buyers and principal residences. But unlike an earlier $7,500 home buyer tax credit, This one does not have to be repaid.

2.  First time buyers defined: For the purpose of this legislation, a “first-time home buyer” is someone who hasn’t owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you’ve owned a vacation home–but not a principal residence–within the past three years, you would still qualify for the credit. 

3.  2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009are eligible for the credit. Anyone who bought a home last year won’t be able to take advantage of it.

4.  Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that’s $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits. 

5.  Refundable: Because the tax credit is “refundable,” qualified buyers can take advantage of it even if they don’t have much tax liability. In other words…unlike the $15,000 tax credit, this tax credit will be refunded to a buyer, if his year end tax liability is less than the credit.

6.  Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.) While the final approved tax credit was not nearly a generous or as liberal as the original senate version, it is still better than nothing and many buyers will be able to purchase including my own daughter. If you have more questions, please contact me via email or 907-373-3575.  All my best, Kristan