Last week President Obama signed THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009. (summary here.) It includes new tax credits for first time home buyers and for GREEN improvements to existing homes. The following is a summary of these two important issues for real estate agents.
Refundable First-time Home Buyer Credit. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applied to homes purchased on or after April 9, 2008 and before July 1, 2009 and was discussed in a previous post on this blog. Taxpayers receiving this tax credit were required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision retains the credit recapture if the house is sold within three years of purchase. Combined with the decline in property values and low interest rates this makes for a GREAT TIME to BUY a HOME!
Tax Credits for Energy-Efficient Improvements to Existing Homes. The law extends the tax credits for improvements to energy-efficient existing homes through 2010. Under previous law, individuals were allowed a tax credit equal to ten percent (10%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the taxable year. For 2009 and 2010, the bill increases the amount of the tax credit to thirty percent (30%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements during the taxable year. The bill provides for an aggregate $1,500 cap on all property qualifying for the credit. If you or your clients are thinking about energy efficient improvements now, do them now.