Monday, February 16, 2009

$8,000 First-Time Buyer Credit Part of Stimulus Package

There's a nice windfall for some homebuyers in the economic stimulus bill awaiting President Obama's signature on Tuesday. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of withholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.[

The final version of the tax credit for homebuyers is a watered-down version of the House proposal to give any buyer a $15,000 tax credit. This proposal is not intended to investors, but for bona-fide "middle class" homebuyers. Of course, an $8,000 tax credit is only a fraction of the price of a Los Angeles starter home. Nevertheless, an $8,000 credit is better than no credit at all. The $15,000 credit for any buyer could have risked creating speculation (and abuse) that would ultimately be to the long-term detriment of the fragile, recovering real estate market.

Jamie Adner