Housing Details in New Stimulus Bill
Tuesday, February 17, 2009
Part of the new $787 billion stimulus plan signed this morning by President Obama brings not only great relief for current homeowners, but future home-buyers too.
There are three key benefits to buyers, and sellers will also benefit because of the incentive, provided to those looking to become first time homebuyers
1) The tax credit will be raised to $8000. It will be a true credit, one that does not need to be paid back, so first time home buyers receive an indirect "reduction" in the price they pay.
2) Interest rates have come down 125-150 basis points, making home ownership more affordable.
3) The loan limits will be raised to $727,000 in high cost areas
This table from Scott DeWolf might also be helpful in deciphering some of the bill's details, with the major modifications shaded:
FEATURE
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CREDIT AS CREATED JULY 2008
APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008
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REVISED CREDIT –
EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009
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Amount of Credit
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Lesser of 10 percent of cost of home or $7500
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Maximum credit amount increased to $8000
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Eligible Property
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Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.
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No change
All principal residences eligible.
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Refundable
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Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.
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No change
Purchasers will continue to receive refund for unused amount when tax return is filed.
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Income Limit
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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).
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No change
Same income limits continue to apply.
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First-time Homebuyer Only
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Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
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No change
Still available for first-time purchasers only. Three-year rule continues to apply.
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Revenue Bond Financing
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No credit allowed if home financed with state/local bond funding.
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Purchasers who utilize revenue bond financing can use credit.
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Repayment
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Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.
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No repayment for purchases on or after January 1, 2009 and before December 1, 2009
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Recapture
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If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.
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If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.
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Termination
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July 1, 2009
(But note program changes for 2009)
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December 1, 2009
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Effective Date
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Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year.
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All revisions are effective as of January 1, 2009
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