Tax credit rules change slightly

The Daily Inter Lake

John Osweiler, a Realtor with Montana Brokers and president of the Northwest Montana Association of Realtors, is a little leery of short sales and not very involved with foreclosures.

But he does know that the new housing climate can be a good one for buyers.

The First-Time Homebuyer Tax Credit as modified in the American Recovery and Reinvestment Act, President Obama's economic stimulus plan, is one reason.

The tax credit, combined with low interest rates on home loans, means those who feel confident that their employment is stable "have an opportunity to purchase more home now than they could have purchased in 2005," Osweiler said.

Buyers priced out of the market in 2005, he said, might have a chance to get back in the market with the following provisions of the modified tax credit.

The original tax credit applied to purchases on or after April 9, 2008; the revised credit applies to purchases from Jan. 1 though Dec. 1, 2009:

Amount of Credit

Original: Lesser of 10 percent of home cost or $7,500.

Revised: Maximum credit increased to $8,000.

Repayment

Original: Yes. A portion (6.67 percent of credit or $500) is to be repaid each year for 15 years, starting with 2010 tax filing.

Revised: No repayment for purchases from Jan. 1 to Dec. 1, 2009.

Recapture

Original: If home sold before 15-year repayment period ends, outstanding repayment balance to be recaptured on sale.

Revised: If home sells within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.

Termination

Original: July 1, 2009 (but program changes for 2009)

Revised: Dec. 1, 2009

Effective Date

Original: Purchases on or after April 9, 2008, and before Jan. 1, 2009. Repayment begins for 2010 tax year.

Revised: All revisions are effective as of Jan. 1, 2009.

Refundable

Original: Yes. Reduces or eliminates income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.

Revised: No change.

Income Limit

Original: Yes. Full amount of credit available for adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000 limits).

Revised: No change.

First-time Homebuyer Only

Original: Yes. Purchaser (and spouse) may not have owned a principal residence in prior three years.

Revised: No change.

Revenue Bond Financing

Original: No credit allowed if home financed with state or local bond funding.

Revised: Purchasers who use revenue bond financing can use credit.

Eligible Property

Original: Any single family residence used as a principal residence.

Revised: No change.