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$8,000 First Time Homebuyer Tax Credit
(contact your attorney or accountant for advice prior to purchasing or relying upon this information)
Who qualifies? Anyone who has not owned a primary residence within the past 3 years.
How do you get the money? You are credited the money on next year's tax return. It is a credit and not a deduction which means if you owe/paid $10,000 in tax for 2009 you will then only owe $8,000. If you already paid the taxes you will get a refund.
What if I paid less than $8,000 in taxes? My understanding is that if you pay less than $8,000 in income taxes in 2009 you will still receive the full credit which means you will pay no taxes, get a refund of all the taxes paid, and get a check for the difference. For example. If you paid $6,000 in income taxes during the year when taxes are due on April 15th your bill will be $0, your refund will be $6,000 plus $2,000 additional.
When does this expire? December 9, 2009. The home must be purchased and closed prior to this date!
PRESIDENT OBAMA ANNOUNCES HOMEOWNER AFFORDABILITY AND STABILITY PLAN -
Read the plan right here!
On February 18, 2009, President Obama announced his Homeowner Affordability and Stability Plan designed to help 7 to 9 million families avoid foreclosure by refinancing or modifying their mortgages. The plan also strengthens the federal commitment to Fannie Mae and Freddie Mac (the government sponsored enterprises, or GSEs). The Obama plan includes these key elements:
Refinancing by the GSEs (Fannie Mae and Freddie Mac) of loans that they own or guarantee. The GSEs will work with their loan servicers to develop a streamlined refinancing program for borrowers with loan-to-value ratios (LTVs) above 80 percent who now face difficulty refinancing.
A $75 billion Homeowner Stability Initiative—with lender, servicer, investor, and borrower incentives to make it work. The program is limited to loans at or below the GSE conforming loan limits.
More support for the GSEs, including doubling of potential Treasury investment from $100 billion to $200 billion for each GSE, to maintain their positive net worth. The plan also raises the cap on mortgages that the GSEs may hold in their portfolios by $50 billion to $900 billion.
NAR has prepared a summary of the plan with additional explanations. You can read it and other information on the Obama plan on realtor.org: http://www.realtor.org/government_affairs/gapublic/homeowner_afford_stability_plan.
PRESIDENT OBAMA SIGNS STIMULUS BILL
H.R. 1, the "American Recovery and Reinvestment Act of 2009" (AARA), passed the House on February 13, 2009, by a vote of 246 - 184. On the same day, the Senate passed the bill by a vote of 60 - 39. The President signed the bill on Tuesday, February 17, 2009. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.
The bill includes the following provisions:
- Homebuyer Tax Credit — The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.
- FHA, Fannie Mae and Freddie Mac Loan Limits — The bill reinstates last year's 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans. These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750. For the few areas where the 2009 limits were higher, the higher limits will apply. In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any "sub-area", i.e. an area smaller than a county. The Secretary's discretion is again limited by the $729,750 cap. These 2009 limits will expire December 31, 2009.
The inclusion of these loan limit provisions in the final bill is a victory for homeowners, buyers and REALTORS®. While these new limits were included in version of the original stimulus bill approved by the House, the bill first approved by the Senate did not. NAR's Call for Action to both the House and the Senate prior to the final vote advocated strongly for the provisions which were then included in the final bill approved by both Chambers. NAR has estimated the new 2009 Loan Limits by county
- Neighborhood Stabilization — Division A, Title XII of the bill provides $2,000,000,000 in additional funding for the Neighborhood Stabilization Program (NSP). The NSP was created by the Housing and Economic Recovery Act of 2089 (Public Law 110–289) to provide grants through the Community Development Block Grant program (CDBG) to states and localities to address the problems that can be created when whole neighborhoods are decimated by foreclosures. The funds can be used to purchase, manage, repair and resell foreclosed and abandoned properties. In addition, the funds can also be used by states and localities to establish financing methods for the purchase and redevelopment of foreclosed properties. After purchase the homes must be used to assist individuals and families with incomes at or below 120% of area median income. Twenty-five percent of funds must be used for households with incomes at or below 50% of area median income. By leveraging their expertise in partnership with others from both the public and private sector, REALTORS® in many communities have been making important contributions to their local communities' neighborhood stabilization programs.
Written by Ken Hotard, Boulder Area Board of Realtors, NAR staff, CAR staff, and Regional Government Affairs Director, Barbara Koelzer, contributed to this report.
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