KINGSPORT — Engaged to be married in late September, Chad Brown knew he’d probably buy a home in the next few years. But the federal government’s tax credit for first-time home buyers prompted him to speed up his plans.
“It was kind of a no-brainer,” said Brown, who purchased a home in the Fairacres community of Kingsport last month. “We’ve been telling everybody — if you’re going to buy a house within the next two years, you might as well do it right now, just because of that credit.”
Part of the American Recovery and Reinvestment Act of 2009, the first-time home buyer tax credit was designed to help encourage home sales and decrease the number of empty houses on the market across the nation.
Eligible buyers can get a tax credit of 10 percent of the home’s purchase price, up to a maximum of $8,000. Put simply, if you’re eligible and you pay $80,000 or more for a home, you’ll get $8,000 back from the federal government.
Only first-time home buyers are eligible. The government considers a first-time buyer as anyone who has not owned his principle residence in the three-year period prior to the purchase.
Carla Dunn, 2009 president of the Northeast Tennessee Association of Realtors, said some people who owned a home years ago may not realize they could be eligible for the tax credit now.
“That’s something we need to drive,” Dunn said. “There are people out there who have owned, but who have rented for different reasons in recent years. If they have not owned a home for three years, they’re considered a first-time home buyer.”
Single buyers are eligible if their income is no more than $75,000, while married couples filing a joint return are eligible if their income is no more than $150,000.
The tax credit does not have to be repaid, as long as the home buyer lives in the house at least three years.
But time is ticking for those wanting to take advantage of the tax credit. It’s available on homes purchased only between Jan. 1, 2009, and Nov. 30, 2009.
“You have to be closed on your home by November 30. So at the very latest, you need to choose a home and get it under contract by November 1,” said Dunn.
Sam and Emily Davis bought their first home in May in the Colonial Heights area, and claimed the tax credit on last year’s federal income taxes through an amended return.
They received a check in the mail two weeks ago from the government.
“It came in the mail and I didn’t know quite how to act,” Sam Davis said.
Last year, the couple was living in the Greensboro, N.C., area and had looked into buying a house there. They had learned about a government tax incentive for first-time home buyers, but that incentive required the buyer to pay back the money over time.
Before they could buy a house in North Carolina, Sam got a job at Vision Productions in Fall Branch, and the couple moved to Northeast Tennessee. Emily, a nurse, got a job at Indian Path Medical Center.
Once here, the couple started searching for their first home, and learned that this year’s tax incentive had changed to their favor.
“We learned they had changed it to $8,000 — and they just write you a check. You don’t have to pay it back,” Sam said. “It was a real blessing.”
The couple found a home in Colonial Heights, and closed on the purchase May 21.
As for that $8,000, the couple plans to renovate their new home, including installing new floors.
“We were really able to take advantage of it as far as picking out a home that we knew we could invest that $8,000 in,” Sam said. “My brother in Goldsboro (N.C.) — he learned about the tax credit, and just put an offer on a home yesterday.”
Chad Brown, who purchased his first house in Fairacres last month, said he and his finance, Clarissa Hills, were thinking of purchasing their new home together. But Clarissa already owned a condominium.
To be eligible for the tax credit, Brown decided to purchase the home by himself. He closed on the property — a 1,500-square-foot, two-story house with three bedrooms and 1.5 baths — on July 17.
He plans to claim the credit on his federal income taxes next year, and use the money to pay for home improvements.
“Now, would I have purchased the house without the tax credit? I don’t know,” Brown said.
Dunn said local real estate professionals have seen an increase in home sales because of the first-time home buyer tax credit. “But not a tremendous amount,” she said.
“I think people aren’t getting the word. It’s amazing that people don’t know about this,” Dunn said.
The National Association of Realtors had pushed for even greater home-buying incentives in the government stimulus package to help reduce the glut of houses on the market. Dunn said the tax credit has helped, “but not to the degree that we had hoped.”
She said the NAR is now lobbying to get the tax credit extended into 2010. It’s also asking that the amount of the credit be increased, and that the government do away with the income limitations attached to the credit.
“Now whether that will pass or not, I don’t know. But that’s what we’re trying to do,” Dunn said.
For more information on the first-time home buyer tax credit, visit www.federalhousingtaxcredit.com or go to www.realtor.org and click on Home Buyers & Sellers.