New Tax Credit for First Time Home Buyers in 2009
On Wednesday, President Barack Obama signed the $787 billion Economic Stimulus Plan into law. We're not going to get into the politics, but simply discuss its impact on our little corner of the world -- residential real estate.
Last year we told you about the Housing and Economic Recovery Act of 2008, which was a tax credit for first-time home buyers. The 2009 stimulus plan also includes a tax credit for first-time home buyers, but is much improved over last year's. This new plan provides a tax credit up to $8,000, while the 2008 tax credit was capped at $7,500. That's not the key difference though. The truth is that the old tax credit was actually an interest-free loan that buyers had to pay back to the government over time. The new tax credit does not have to be paid back ever, as long as the buyer doesn’t sell the home within the first three years.
It's important to note that this is not a tax "deduction." It is a tax "credit." That means it doesn't just offset your taxable income, it actually reduces your tax burden dollar-per-dollar up to $8,000. That's right, first-time home buyers can receive $8,000 of "free money" to buy a home in 2009.
Of course, with all government programs, there are some restrictions. If you would like more information on how these restrictions might affect you, feel free to contact us.