On Tuesday, February 17th, President Obama signed H.R. 1, the “American Recovery and Reinvestment Act of 2009” which previously passed both houses of the US Congress (after going back and forth for several weeks). You may have heard about several versions of the housing related components of the bill.  The final version includes:

  • An $8000 tax credit for first-time home buyers, which does not have to be repaid
  • Reinstates 2008 loan limits for FHA, Freddie Mac, and Fannie Mae (equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of $729,750)
  • $2 billion in Neighborhood Stabilization funding to help states and localities to purchase, manage, repair and resell foreclosed and abandoned properties
  • Funding for energy programs, which could be used to support property owners’ investment in energy efficiency upgrades
With the most interesting and helpful to first-time home buyers being the $8,000 tax credit.  This is a modification of the existing $7,500 tax credit with the biggest changing being the fact that you no longer have to pay it back.  Here is a full comparison:
FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act
Major Modifications Bolded
February 2009
FEATURE
CREDIT AS CREATED JULY 2008 APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008
REVISED CREDIT – EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009
Amount of Credit
Lesser of 10 percent of cost of home or $7500
Maximum credit amount increased to $8000
Eligible Property
Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.
No change
All principal residences eligible.
Refundable
Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser.
No change
Purchasers will continue to receive refund for unused amount when tax return is filed.
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).
No change
Same income limits continue to apply.
First-time Homebuyer Only
Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
No change
Still available for first-time purchasers only. Three-year rule continues to apply.
Revenue Bond Financing
No credit allowed if home financed with state/local bond funding.
Purchasers who utilize revenue bond financing can use credit.
Repayment
Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.
No repayment for purchases on or after January 1, 2009 and before December 1, 2009
Recapture
If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.
If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009.
Termination
July 1, 2009
(But note program changes for 2009)
December 1, 2009
Effective Date
Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year.
All revisions are effective as of January 1, 2009

You can download this information for the National Association of Realtors as a slide deck in PDF format (300K) (explaining the details of the 2009 first time home buyers credit) or one-page chart (300K PDF) (explaining the difference between the 2008 and 2009 versions of the first time home buyers credits).
This is a nice incentive for first-time buyers, and the fact that it is both refundable and does not have to be repaid is a significant improvement over the existing “credit” (which was basically a zero interest loan).  To find out more and ways you can benefit from this new incentive, contact the Byrd Realty Group today.  We would be happy to set-up a meeting to explain how you can maximize your benefits from this credit and other government incentives.
As a side-note from the housing related components, Virginia also stands to receive:
  • $695 million for roads and bridges
  • $116 million for rail projects
  • $2 billion for school construction
Disclosure:
The Byrd Realty Group is a group of Realtors and are not tax professionals.  You should seek advice from a CPA or professional tax preparer.