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The American Recovery and Reinvestment Act of
2009 features an $8,000 tax credit for first-time
buyers who purchase a home on or after Jan. 1, 2009
and before Dec. 1, 2009.

Details of the tax credit include:
The temporary credit is only available for home purchases made from Jan. 1, 2009 to before Dec. 1, 2009 and is equal to 10 percent of the cost of the home, up to a maximum credit of $8,000. (For example, a home purchased for $80,000 or more would qualify for the full $8,000 credit while a $70,000 home would only qualify for 10 percent, or $7,000)


Buyers claim the credit on their federal tax return to reduce their tax liability. If the credit is more than their total tax liability that year, the buyer will get a refund check for the balance.


Only first-time homebuyers can take advantage of the tax credit. A first-time buyer is defined under the tax credit as an individual who has not owned a home in the last three years. For married joint filers, both must meet the first-time homebuyer test to take the credit on a joint return.


Eligible properties include anything that will be used as a principal single-family residence—including condos and townhouses.


There are income guidelines on the credit. Individuals with an adjusted gross income up to $75,000 (or $150,000 if filing jointly) are eligible for the full tax credit. The credit is phased down for those earning more and is not available for those with an income above $95,000 (or $170,000 if filing jointly).


The new tax credit does not have to be repaid if the buyer stays in the home at least three years. But if the home is sold before that, the entire amount of the credit is recaptured on
the sale.


People who purchased homes under the 2008 $7,500 tax credit program will still be required to repay that credit to the government over a 15-year period.

More Frequently Asked Questions

Q. Is the deadline date (before December 1, 2009) the closing date or the date that the
residence goes under contract?
A. Based upon 36(c)(3) of the Code, the deadline is the date of acquisition of the principal
residence. Therefore, the deadline date is the closing date.


Q. Can the tax credit be used for a mobile home on leased or owned land?
A. Yes. Publication 530, which generally discusses acquisition costs and tax treatment (and
also includes a discussion of the First Time Homebuyer's Credit), provides that a "qualified
home" (principal residence) includes a house, condominium, coop, mobile home, house
trailer, boat or other similar property that includes cooking and toilet facilities. That the IRS
considers a mobile home a "qualified home" for their purposes appears well settled;
therefore, a mobile home can be treated as a principal residence and its purchase can
qualify for the credit if all of the other requirements of the credit are satisfied.


Q. Can the tax credit be used for a 2-unit or 4-unit multi-family property, if one unit is
owner-occupied by the first time homebuyer?
A. Yes, Section 36 allows a credit for a first-time home buyer of a principal residence.
Section 121 allows for an exclusion of gain from the sale of a principal residence. Under the
Code section 121 regulations, when a taxpayer sells a building where part of the building is
used as a principal residence and part of the building is used for other purposes, then Code
section 121 applies to the gain allocated to the sale of the part of the building used as a
principal residence. These same rules should apply to the Code section 36 credit.
Therefore, if a taxpayer purchases a multiple unit property and resides in one of the units as
the taxpayer’s principal residence, then the purchase price allocated to the unit that is used
as a principal residence should qualify for the credit.


Q. Can I move from a mobile home I own to another property type and use the program?
A. No. If you currently own a property defined by the IRS as a principal residence, then
you are not considered a first time home buyer for another property purchase.

Note: This information is general in nature and not intended to be personal legal or tax
guidance. Consult with your personal tax advisor to determine if provisions apply to your
specific situation.




Maine Association of REALTORS®
May 2009

More Information:

• First-Time Home Buyer Credit Flyer
• $8,000 Tax Credit Chart
• $8,000 Tax Credit FAQ
• First-Time Home Buyer Credit - IRS Form 5405
• IRS Filing Guidance for New Tax Credit