The American Recovery and Reinvestment Act of 2009, commonly referred to as the Stimulus Bill, was signed into law on February 17, 2009 and contains an expanded tax credit for first-time homebuyers who make qualifying purchases prior to December 1, 2009.

This update summarizes the existing first-time homebuyer credit provision and the modifications made by the Stimulus Bill.

The Stimulus Bill Extends the First-Time Homebuyer Credit to Purchases Made Before November 30, 2009 and Increases the Credit to $8,000

The first-time homebuyer credit allows a 10% credit (with a maximum credit limit of $8,000 (previously $7,500)) for a first-time homebuyer for principal residences purchased after April 9, 2008 and before December 1, 2009.  The credit begins to phase out for joint returns with modified adjusted gross incomes over $150,000 ($75,000 for nonjoint returns) and is eliminated at modified adjusted gross incomes of $170,000 ($95,000 for nonjoint returns).  A first-time homebuyer is any individual who had no present ownership interest in a principal residence for a three-year period ending on the date of purchase of the principal residence in question.  If the individual is married, this time period is measured by treating such individual as owning any home owned by his or her spouse during such three-year period.

The previous recapture of the credit, or required payback of the credit amount, is waived for principal residences purchased after December 31, 2008 and prior to December 1, 2009, and not sold during the first 36 months of ownership.  Also, for a purchase prior to December 1, 2009, the taxpayer can elect to treat the home as purchased in 2008 (although not for purposes of computing the 36-month recapture period).

Additional Information

This update is only intended to provide a general summary of certain tax provisions of the Stimulus Bill.  You can find discussions of other laws, regulations and rule proposals of interest on our website.