Tax Credit for New Homebuyers

Happy Wednesday!

Tax Credit for New Homebuyers

There have been a lot of questions about the New Homebuyer Tax Credit. So, we thought we would put together a quick reference guide for you and your clients. We have also attached the form that your clients will need to fill out for their taxes with this email.

New Homebuyer Tax Credit Explained

FEATURE
CREDIT AS CREATED JULY 2008

APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008
REVISED CREDIT –

EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009

Amount of Credit
Lesser of 10 percent of cost of home or $7500
Maximum credit amount increased to $8000

Eligible Property
Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.
No change

All principal residences eligible.

Refundable
Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.
No change

Purchasers will continue to receive refund for unused amount when tax return is filed.

Income Limit
Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000).
No change

Same income limits continue to apply.

First-time Homebuyer Only
Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
No change

Still available for first-time purchasers only. Three-year rule continues to apply.

Revenue Bond Financing
No credit allowed if home financed with state/local bond funding.
Purchasers who utilize revenue bond financing can use credit.

Repayment
Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.
No repayment for purchases on or after January 1, 2009 and before December 1, 2009

Recapture
If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.
If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.

Termination
July 1, 2009

(But note program changes for 2009)
December 1, 2009


Effective Date
Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year.
All revisions are effective as of January 1, 2009


FHA Loan Limit Increase Update

We have noticed that many of you are still not aware of the recent FHA Loan Limit Increases. The loan limits have been returned to the higher amounts that were approved in 2008. Here is a summary of what the New FHA Loan Limits are

$406,250 - Adams, Arapahoe, Broomfield, Denver, Douglas and Jefferson

$460,000 - Boulder

$417,500 - Weld

$312,000 - Larimer