In 2008 (due to the economic downturn), the Housing and Economic Recovery Act passed that enabled Americans to qualify for a federal tax credit if they purchased a home that year. If you purchased a home in 2008, the credit acts like an interest free loan and was expected to be paid back on your tax return over the course of 15 years. For homes purchased in 2009, the amount of the credit increased and the requirement to repay the credit was removed, unless the home ceases to be your principal residence within the 36-month period beginning on the purchase date.
The amount of the credit for 2008 is 10% of the purchase price of your home with a maximum credit of $7,500. In 2009, the maximum credit was $8000. This was true for both single taxpayers and married filing jointly taxpayers. For married filing separately taxpayers they credit is half of the total.
To qualify for the credit, a homebuyer either needed to have purchased a principal residence in the United States between April 8, 2008 and December 31, 2009. To avoid “flippers,” buyers also needed to prove that they had not purchased a home 3 years prior to the date of purchase of their new home. For example, if you owned a home and sold it in 2004 and started renting and then decided to purchase a new home in 2009 you would qualify for this credit as a first-time homebuyer.
Pretty great deal and helpful way to boost the economy, right? So is this available today?
No, the federal tax credit ended in 2010 (and sidebar, you can still qualify for these credits if you haven’t taken advantage of them and you did purchase a home in prior to 2010.
However, while this tax credit may be unavailable, many states do feature a first-time home buyer program. Illinois, Texas, Ohio, and Florida — to name a few — provide first-time home buyer programs to help provide tax breaks.
For instance, being based in Washington State, there are several first-time home buyer programs that a qualified lender should help walk you through. These programs can range from a percentage to a flat rate down payment assistance for your loan. Typically, eligibility is based on your income.
For help claiming the credit on your 2008 or 2009 tax return or find out about current home buyer programs, feel free to contact us directly.