WASHINGTON -- Now that Congress has fixed the crucial flaw in last year's home-purchase tax credit, who will be able to make use of the new and improved version? And what about timing: How long do buyers have to locate a house and close the deal to qualify?
These are just two of the flurry of questions surrounding the $8,000 housing credit for 2009 authorized by Congress' sprawling, $789 billion stimulus plan. So here's a quick rundown on the credit and several other real estate-related benefits in the package.
Though the Senate version of the bill would have created a much more generous and costly tax credit -- up to $15,000 per purchase with no limitation to first-time buyers -- it was quickly rejected in the conference committee. Negotiators added $500 to last year's $7,500 credit and made the 2009 version non-repayable. There's still widespread misunderstanding on the issue, but qualified purchasers who closed in 2008 will not reap the benefits of the 2009 amendments. They're stuck with the old model, and will have to pay back the credit -- more correctly an interest-free loan from the government -- over the coming 15 years.
People who buy homes between Jan. 1 and Dec. 1 of this year may qualify for the $8,000 non-repayable updated credit. But they'll still have to pass most of the key eligibility tests imposed under the 2008 program.
For example, they must be "first-time" buyers under the 2008 definition: Either you've never owned a house before, or you haven't owned or co-owned one during the three years preceding the date you close on your 2009 purchase.
Carefully planning the timing of your closing could be worth thousands of dollars to you. Say you once owned a house earlier in the decade, but sold it on March 25, 2006. If you close on a house in 2009 before March 25, you lose eligibility for the $8,000 credit. Push settlement back to March 26 or later -- anytime before Dec. 1, when the new credit program's eligibility period expires and you're $8,000 to the better.
As in the 2008 credit, there's a household income test as well. The 2009 version phases out eligibility for the credit starting at $75,000 adjusted gross income for single taxpayers, and $150,000 for joint-filing couples. The 2009 program also removes last year's prohibition against purchases financed with state and local tax-exempt mortgage revenue bond programs, which are popular among moderate-income homebuyers in many parts of the country. This year such loans won't eliminate your eligibility for the $8,000 credit.
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