goldpiggybankondollarbills$8000 Tax Credit to First Time Home Buyers. – Called The American Recovery Reinvestment Act.

There are some interesting details to the plan.

  • Available for purchases made from Jan. 1, 2009 to December 1, 2009.
  • 10% of the cost of the home up to $8000.
  • Buyers claim the credit on thier federal tax return to reduce their liability.  If the credit is more than their total tax liability that year, the buyer will get a refund check for the balance.
  • A first time homebuyer is defined under the tax credit as an individual who has not owned a home in the last three years.
  • If you are married joint filers, both must meet the first-time homebuyer test.
  • Eligible properties include anything that will be used as a principal single-family residence including condo and townhouses.
  • The credit is only available to individuals with an adjusted gross income up to $75,000 or $150,000 if filing jointly.  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.
  • You must live in the home for 3 years or you owe the money back.

My musings……..

I wish they would publish the methodology they used to create these rules.  Who is the target audience?

It is interesting to note that if you are married, both couples must pass the test.  I know that the intention is discouraging a segment of the population from double dipping – but the credit is awfully prejudiced against a married citizen who has never purchased thier own home.  Married couples have lower default rates than unmarried borrowers.  If you are planning to get married this year to someone who has owned a home – you may want to buy a home first and get married in 2010.

The credit also seems prejudiced against new professionals like ecomomists, engineers, doctors and lawyers who come out of university to high paying jobs, but also carry student loan paybacks.  Demographically, you would think that a stimulus bill would be targeted to this market segment – not regulate away from it.

New residents to the United States doing middle management work should benefit hansomely from this credit.

Please comment if you feel like this Stimulus package has flaws.