Obama’s First Time Home Buyers Tax Incentive

Over the past few months, it seems that congress and President Obama have passed a great number bills to help stimulate the economy. While many of these bills are viewed mainly as a bailout to some of the very people who got us into this mess in the first place, the First Time Home Buyers Tax Credit can actually help the people who need it the most.

The American Recovery and Reinvestment Act

The First Time Home Buyers Tax Credit is part of the American Recovery and Reinvestment Act of 2009, which is an economic stimulus packaged passed signed into law by President Obama on February 17, 2009.

The American Recovery and Reinvestment Act is intended to help jump start the economy and contains a number of provisions, including expanded unemployment benefits, tax relief, as well as the first time home buyers tax credit. Of the $787 Billion Dollars allotted for the American Recovery and Reinvestment Act $237 Billion is slated for individual tax relief, $51 Billion for Corporate Tax Relief, and almost $148 Billion has been set aside for healthcare. Other funds will goto housing, HUD, scientific research, Energy, and Infrastructure.

First Time Home Buyers Incentive Explained

$6.6 Billion dollars has been allotted for the first time home buyers tax credit, which provides up to $8,000 towards the purchase of a home for qualified citizens. In order to be eligible to receive the tax credit, the buyer, and their spouse, muse not have owned a primary residence in the last 3 years and must make less than $75,000 a year, or $150,000 for couples. The tax credit is figured off of 10% of the value of the home up to $8,000.

The first time home owners tax credit can be used on almost any type of home, including houseboats, mobile homes, new construction, single family homes, manufactured homes, and condominiums. In order to qualify, the home must be purchased between January 1, 2009 and December 1, 2009.

2008 First-time Homebuyers Incentive vs 2009 First-time Homebuyers Incentive

This is not the first time that the Federal Government has offered an incentive to new home buyers. In fact last year, with the passage of the Housing and Economic Recovery Act of 2008, an $8,000 no interest loan was made available for those who purchased a home between April 8, 2008 and December 1, 2009. However, this loan had to be paid back by the homeowner.

The First Time Home Buyers Tax Credit of 2009, on the other hand, does not need to be paid back. However, it is necessary to live in the home for at least 3 years. Those that sell the home before then will have to return the money, although some exceptions may be made, such as in the case of divorce.

Claiming the 2009 First-time Homebuyers Tax Credit

The 2009 Home Buyers Tax Credit can be claimed on either 2008 or 2009 tax returns. People who have already filed their 2008 taxes can file an amended tax return, which is usually processed within 8 weeks, allowing them to receive their tax credit early. While the full amount of the tax credit will be sent to those who owe nothing in taxes, including those with no income, if you have an outstanding debt with the IRS, the money will be used to pay this debt first.

When you look at the big picture, the First Time Home Buyers Tax Credit of 2009 makes up less than 1% of the $787 Billion American Recovery and Reinvestment Act Stimulus Package. However, this tax credit can be a big help to those who are buying a home for the first time.