First-Time Homebuyer Tax Credit
(Housing and Economic Recovery Act of 2008-H.R. 3221)
The Housing and Economic Recovery Act ("the Act") of 2008 (H.R. 3221), which was signed into law on July 30, 2008, established a refundable first-time homebuyer tax credit. Since then, MFA has received numerous questions regarding the use and applicability of the tax-credit as it relates to MFA financed first-time homebuyer mortgage loans. This memo is intended to explain the terms of the tax credit and clarify its use with MFA programs.
• The Act establishes a refundable tax credit ("Tax Credit") for first-time homebuyers (of a principal residence) of an amount equal to the lesser of 10% of the purchase price of the residence or $7,500, whichever is less.
• The Tax Credit is available for homes purchased between April 9, 2008 and July 1, 2009.
• The Tax Credit is phased out for a single taxpayer with a modified Adjusted Gross Income of between $75,000 and $95,000 ($150,000 and $175,000 for joint filers).
• The term, "First Time Homebuyer" is defined as an individual (or married couple) with no present ownership interest in a principal residence during the 3- year period ending on the date of the purchase of the new residence (similar to the MFA First-Time Homebuyer rule).
• The Tax Credit will not apply if the home is purchased from a related person (i.e. relative).
• The Act requires the homebuyer to repay ("Recapture") the Tax Credit in the 15 years following the purchase of the home, at a rate of 6.66% of the Tax Credit amount each year. The Recapture applies for the entire 15 year period.
• The Tax Credit cannot be claimed by the homeowner if the purchase of the home is funded with Tax-Exempt Mortgage Revenue Bonds (i.e. Mortgage$aver Program).
• In addition, the Tax Credit cannot be claimed if the borrower is a non-resident alien or if the borrower sells the property within the taxable year.
MFA has also been asked weather or not the tax credit can be claimed by a first-time homebuyer purchasing a home funded with Taxable Mortgage Revenue Bonds ("HERO First Program"). Since the HERO First Program is not funded with Tax-Exempt Mortgage Revenue Bonds, it would be permissible for a first-time homebuyer using the HERO First program to claim the Tax Credit.
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