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ACT EXPANDS HOMEBUYER TAX CREDIT, AMONG OTHERS
By Amy Riggin/OF THE COMMERCIAL STAFF
Monday, March 2, 2009 9:55 AM CST
As part of the American Recovery and Reinvestment Act signed into law last week, qualified first-time homebuyers can receive a tax credit of up to $8,000 if they purchase their homes before Dec. 1.
“The biggest thing I tell taxpayers who are wanting to claim the first-time homebuyer credit is that if they’ve bought the home in 2009 they want to be sure that they’re able to take advantage of the changes in the credit,” said Blake Williams, special projects manager for Southern Good Faith Fund’s Asset Builders program. “We have definitely been proactive in trying to contact the IRS and trying to get the right information so that we can better inform the taxpayers who come into our site. There are a lot of changes going on.”
The Treasury Department and Internal Revenue Service released information this week about the homebuyer credit and several others created or expanded by President Barack Obama’s stimulus plan.
Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married taxpayers filing separately. They have an option of claiming the credit on their 2008 tax returns, due April 15, or their 2009 returns.
“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit,” IRS Commissioner Doug Shulman said. “This important change gives qualifying homebuyers cash they do not have to pay back.”
The credit does not have to be repaid if the home remains the taxpayer’s main home for 36 months after buying it. The amount of credit begins to phase out for taxpayers whose income exceeds $75,000, or $150,000 for joint filers.
The IRS said those who purchased homes between April 8 and Dec. 31, 2008, still can only receive a maximum credit of 10 percent of the purchase price, up to $7,500 or $3,750 if married filing separately. The credit for 2008 purchases must be repaid over 15 years beginning in 2010.
According to the Treasury, nearly one out of every two homebuyers last year bought homes for the first time.
“The expansion ... gives money to taxpayers when they need it most while also targeting an important group of buyers,” Treasury Secretary Tim Geithner said.
Real estate agent Bill Wilson, co-owner of Wilson-Rodgers & Associates of Pine Bluff, said he thinks the expansion will benefit the housing market but cautioned buyers to do their homework first.
“Most people don’t understand what a tax credit is as opposed to a tax deduction,” Wilson said, adding, “The credit depends on the price of the house and income — it’s not a cut-and-dried, easy thing but it’s definitely a step in the right direction.”
He said there has never been a better time to buy.
“There is money available from the banks if they have decent credit and very low down payments are available,” Wilson said. “I think that anybody interested in buying a home should contact their banker and see what programs are available for them and their income range, and I think they’ll be pleasantly surprised.”
Interest rates are “as good as they’ve been in 50 years” and home prices are reasonable, he said.
“Our economy in Pine Bluff has changed very little,” Wilson said. “We don’t have a recession going on here except in the minds of the people.”
The following are other tax changes brought about as a result of the Recovery Act:
Making Work Pay: Williams said SGFF has worked to clear up misconceptions about that credit.
“I think a lot of people have been expecting to get that credit with their refund this year,” he said. “We’ve had to explain to them that they’re going to receive that payment over time through their place of employment” through a reduction in wage withholding.
It allows a credit of up to $400, or $800 for married couples filing jointly. It will apply retroactively to the beginning of this year and extend through 2010, and will apply in full to taxpayers with income of less than $75,000 or $150,000 if married and filing jointly.
New car deduction: A change in this deduction, Williams said, allows taxpayers who purchase a vehicle before Dec. 1 to deduct the sales tax regardless of whether they itemize.
“Obviously it’s designed to encourage folks to buy new vehicles,” he said.
Child tax credit: A change in the child tax credit reduces the amount of qualifying income required from $8,000 to $3,000.
“That’s going to impact a lot of our clients,” Williams said.
Unemployment: The first $2,400 of unemployment benefits received in 2009 will not be subject to federal taxes.
More information about new tax credits can be found at www.irs.gov.
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