First-Time Homebuyers to Receive New Tax Credit

August 12, 2008 The Legal Intelligencer

The American Housing Rescue and Foreclosure Prevention Act of 2008, signed into law by President Bush July 30, contains numerous provisions designed to stabilize the housing market, including a well-publicized bailout of the quasi-governmental financial behemoths, Freddie Mac and Fannie Mae. Also included in the act is a refundable tax credit available to first-time homebuyers. The operative rules for this tax credit are contained in the new Section 36, added to the Internal Revenue Code by the act.

Under the act, an individual who is a first-time purchaser of a principal residence located in the United States is entitled to a tax credit equal to the lesser of 10 percent of the purchase price of the residence or $7,500 ($3,750 for married individuals filing separately).

If two or more individuals who are not married purchase a principal residence together, the amount of the allowable credit is to be allocated among such individuals in accordance with rules to be issued by the Internal Revenue Service, provided that the total amount of the credits allocated to all of the purchasers may not exceed $7,500. This provision could apply to home purchases by same-sex couples or among family members other than husbands and wives. It is anticipated that these rules, when issues by the IRS, will allocate the credit taking into account each individual's proportionate contribution toward the purchase price of the residence.

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