Hands On The Heartland
Checking The Pulse Of The Kansas City Real Estate Market

The $8,000 first time homebuyer tax credit is part of the American Recovery And Reinvestment Act Of 2009 and the  credit will have a huge effect on many Kansas City home buyers. The basis of tax credit is home buyers receiving a tax credit of 10% of the purchase price of their home – up to maximum $8,000 tax credit cap. Assuming the home is not sold again within 36 months, the credit does NOT have to be repaid. If a home IS sold within the 36 month period then the ENTIRE tax credit amount will have to be repaid. So buyers should be sure to get comfortable in their new home for at least a few years.

Only first time home buyers are eligible for the tax credit – first time homebuyers defined as buyers who have not owned a home in the past three years. Also to qualify, a buyer’s adjusted gross income can not be greater than $75,000 if taxes are filed individually or $150,000 for couples filing jointly. Borrowers who make more could still qualify for a PARTIAL credit as long as their income is not greater than $95,000 or $170,000 if filing jointly. Who else wouldn’t qualify for the $8,000 tax credit? Non-resident aliens, children buying a home from their parents, investors looking to rent out the property and/or buyers who closed on their home in 2008 need not apply. 

To qualify for the tax credit, the home purchase must close  between 1/1/09 and 11/30/09. Homebuyers need to be aware they won’t see the benefit at the closing table and will instead realize the benefit at tax time. Buyers should certainly celebrate that it’s a true CREDIT rather than a deduction. This means a homebuyer will be able to take a dollar for dollar reduction on their federal taxes. Should a homebuyer owe less in federal taxes than the tax credit amount, the homebuyer will get a refund check back from Uncle Sam for the difference! Buyers have the choice of taking the credit on their 2008 taxes, amending their 2008 taxes if they’ve already filed or they can wait and take the credit on their 2009 taxes. More information on the tax credit is also available at Recovery.Gov. 

Jason Brown is not a tax expert and homebuyers are advised to contact a Certified Public Accountant to discuss the tax ramifications of the homebuyer tax credit on their potential home purchase. 

Posted by Jason A. Brown

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