As part of the Business Assistance Act of 2009, the Federal Goverment has extended the first time home buying tax credit through April 30, 2010. In addtion, existing home owners are now eligible if they have owned a principal residence for 5 consecutive years out of the 8 years preceeding the purchase of a new home.
Time Line of First Time Homebuyer Credit
Since it was first passed in 2008, the Federal tax credit has had a significant impact on Maine real estate, resulting in a surge in demand during the second half of 2009, when requirements for the payback of the credit were eliminated. Below is a brief timeline of the credit changes.
Tax Year 2008: A credit of $7,500 is available and must be paid back over 15 years.
Jan-Nov 2009: A credit of $8,000 is available and the requirement to pay it back is eliminated.
Dec 09-Apr 2010: A credit of $8,000 is available, and the time limit is extended. The credit does not need to be paid back.
Nov 09-Apr 2010: A credit of $6,500 is extended to "long-term" residents. The credit does not need to be paid back.
Until Apr 2011: The homebuyer credit is available for qualified members of the US uniformed services.
Requirements of Tax Credit
The tax credit is caluclated on the purchase price of the home to a maximum of 10% of its value. For 2010 the maximum credit is $8,000 (or $4,000 for married couples filing separately).
Long-term residents are eligible for a lower credit, to a maximum of $6,500 (or $3,250 for married couples filing separately).
The maximum purchase price of a home is $800,000. There is no gradual reduction of the credit.
Qualification for the Credit
A first-time homebuyer is defined as someone who had not owned a primary residence in the three-year period ending on the date of the current home purchase. Married couples are considered first-time buyers if neither spouse has owned a home in the previous three year period.
Long-term residents are defined as individuals who have lived in their residence for at least five consecutive years in the eight-year period that endcs on the purchase date of the new property.
The tax credit only applies to the purchase of a primary residence. This includes a house, condominium, co-operative apartment, houseboat or mobile home. Current ownership of a vacation home or rental property does not disallow the availability of the credit, provides those properties we not used as a primary residence for at least three years preceeding the purchase of the new home.
The credit is phased out for individuals with modifed adjusted gross income between $75,000 to $95,000. For married couples filing a joint return, the phase out range is $150,000 to $175,000. Effective November 6, 2009, the phase out range begin at $125,000 or $225,000 for married couples.
Download Complete Update
The Maine Assocation of Realtors (MAR) has prepared a complete update of the credit, which can be downloaded: Federal Tax Credit.