The federal Government has passed the Housing and Economic Recovery Act for first time home buyers. This plan gives a helping hand to first time home buyers if they choose to use it. With interest rates low and inventory high the government is hoping that this plan will coax some first time home buyers off of the fence and into the market. Here is a outline of the Housing and Economic Recovery Act 2008.

HOUSING AND ECONOMIC RECOVERY ACT OF 2008 First-time Homebuyer Tax Credit

FEATURE H.R. 3221 Housing and Economic Recovery Act of 2008 Amount of Credit Ten percent of cost of home, not to exceed $7500 Eligible Property Any single-family residence (including condos, co-ops) that will be used as a principal residence. Refundable Yes. Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year. Income Limit Yes. Full amount of credit available for individuals with 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, respectively). First-time Homebuyer Only Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase. Recapture Yes. Portion (6.67 % of credit) to be repaid each year for 15 years. If home sold before 15 years, then remainder of credit recaptured on sale. Impact on District of Columbia Homebuyer Credit DC credit not available if purchaser uses this credit. Effective Date Purchases on or after April 9, 2008 Termination July 1, 2009 Interaction with Alternative Minimum Tax Can be used against AMT, so credit will not throw individual into AMT.