On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA) into law making it the most ambitious and most expensive economic bill in the history of our country. This package has been seen by many as the keystone of our economic recovery.

The purpose of the bill is to:

1. Preserve and crate jobs and promote economic recovery
2. To assist those most impacted by the recession
3. To provide investments needed to increase economic efficiency by spurring technological advances in science and health.
4. To invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits
5. To stabilize State and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increase.

Some of the pertinent features of the bill are listed below.

The bill had started out as a tax benefit proposal for all buyers and was pared down in the final bill to an $8,000.00 credit for first-time home buyers. The opportunity to take advantage of this credit for first-time home buyers occurs upon the purchase of a home between January 1, 2009 and November 30, 2009. The purchase must be within this time period to take advantage of the credit.

A homeowner who has previously owned a home, may take advantage of this credit as a “first-time home buyer” if they have not owned a principal residence in the 3 years immediately prior to purchase.

The first-time home buyers who buy during the specified period will receive an $8,000.00 credit against income taxes, thereby reducing or possibly eliminating income taxes for 2009. This is because tax credits reduce income tax liability dollar-for-dollar. In addition, if there is any unused credit (tax liability is less than $8,000.00), the unused tax credit will be paid outright to the home buyer by check.

Another significant feature of the ARRA is that it reinstates the 2008 loan limits for FHA, Freddie Mac and Fannie Mae equal to the greater of 125% of the 2008 local area median home price or $271,050.00 for FHA and $417,000.00 for Fannie and Freddie with an overall maximum cap of $729,750.00.

ARRA also promotes making real estate more “green.” Tax credits are available to homeowners who install energy-efficient and green-energy systems. Homeowners who install green energy systems such as solar panels and solar water heaters can recover 30%of the cost as a tax credit. Additional tax credits are available for insulating homes and installing energy-efficient air-conditioning systems. Commercial properties will also benefit from these tax credits.

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