Some Home Buyers Benefit from Stimulus Package

Washington, DC, Feb. 17, 2009--Some home buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes, thanks to the new stimulus legislation.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

The credit can be taken on a home buyer's tax return.

The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was actually a loan instead of an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.

Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.

The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. "I think there are many homeowners who would be trading-up but they have had no buyers for their own homes," Yun said.

First-time homebuyers struggling to come up with down payments are out of luck. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.

The credit also provides a nest egg. Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy. To top of page