Hey, Mister, Can You Spare A Dime?

Ever since the “American Recovery and Reinvestment Act of 2009 (aka The Stimulus Bill) was passed in February, many homebuyers have been trying to figure out what this means for them. Sure an $8,000 tax credit is great, but how do you get and how do you qualify?Here is a brief rundown of the main points of interest:

• Repayment - This tax credit does not have to be repaid. However, if the qualifying home is sold within three years of purchase, the entire amount of the credit must be repaid.
• Credit Amount - Credit will be for 10% of the purchase price of the property up to $8,000.
• Property Eligibility - All primary residences including single-family homes, condos, townhomes, mobile homes and even houseboats (not that that matters much in Missouri). Duplexes do qualify, but generally, only 50% of the property is considered your primary residence so you can only consider half the purchase price when determining the amount of credit.
• Personal Eligibility - For first-time homebuyers only. In this case, a first-time homebuyer is considered someone who has no owned a primary residence in at least 3 years.
• Income Limits - Credit begins phasing out when the purchaser’s income exceed $75,000 for a single person or $150,000 for a married couple.
• Timetable - Available for purchases between January 1, 2009 and December 1, 2009.
• Claiming the Credit - Fill out IRS From 5404 to determine your amount of eligibility and apply this amount to your 1040 tax return on Line 69.

One of the biggest concerns with this tax credit is that you don’t actually see the money until after you purchase the property. You might receive the funds within just a month or so of the purchase, but that doesn’t do a lot if you need it up front. Thankfully, in the State of Missouri, there is way around this issue.

In response to the passage of the Stimulus Bill, the Missouri Housing Development Corporation unveiled a loan program that will give you as much as $6,750 prior to closing, using your pending tax credit as collateral. As long as this amount is repaid by June 2010, no interest will be due on the amount. This program is available only for Missouri and more info can be found here.

While you can’t use this credit on an outright investment property, the fact that it is available for duplexes and foreclosures makes it an appealing option if you are looking to take advantage of this great buyers market and also find a place to live. If you are looking to do a bit of rehabbing, you can even use the $8,000 to help fund the project.

On the other side of the situation, this program should also be a help to rehabbers trying to sell their finished projects. A free check for $8,000 might be too much for formerly skiddish buyers to pass up, which may help the residential sales market in the coming year. It’s really a win-win for everyone involved in the real estate transaction.

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