Nick Piscitelli asked:
Well, the market is all abuzz over the Housing and Economic Recovery Act of 2008′s new $7,500 Federal Tax Credit for First Time Home Buyers. And well it should be! Right now, buyers should be out there buying! Rates are low, there is an excessive amount of inventory to choose from, and with this new tax credit it is clear that the time to act is NOW! But everyone seems to have a different idea about what this credit is all about. I’ve written this article to highlight this new tax credit and shed some light on exactly what the benefits are to the First Time Home Buyer who takes advantage of this credit. Below are the most common questions I am asked regarding the new credit, along with an easy to understand answer.
Who is eligible for this credit?
The $7,500 credit is available to first time home buyers only (a first time home buyer is defined as a buyer who has not owned a home during the past three years.) If you are a U.S. citizen, file taxes, and fit the definition of the first time home buyer, you are eligible to participate!
Are there any income limitations?
Yes. For a single individual (or head-of-household) the modified adjusted gross income (MAGI) must be less than $75,000. For a married couples filing a joint income tax return, the income limit is $150,000.
Single or head-of-household taxpayers making between $75,000 and $95,000 are eligible for a partial first-time home buyer tax credit. Married couples making between $150,000 and $170,000 are eligible for a partial first time home buyer tax credit.
What if I pay less than $7,500 in income taxes? Do I lose some of my credit?
No! The tax credit is refundable, meaning that if you pay less than $7,500 in taxes, the government will write you a check for the difference! As an example, if you owed $6,000 in federal income taxes, you would pay NOTHING and receive a check for $1,500 from the government. Another great example would be if you are due to receive a refund of $2,000 from the government. That refund would grow to $9,500 (the $2,000 original refund amount PLUS the $7,500 tax credit!)
What are the effective dates?
You must purchase a home after April 9, 2008 and before July 1, 2009. The home buyer must actually make settlement on the home during this time period.
What types of homes qualify for the tax credit?
Single family homes, townhomes, and condominiums all qualify, assuming that the home will be used as the primary residence and the buyer hasn’t owned a home in the prior three years.
Do I have to pay back this credit?
Yes, the credit is basically an interest free loan which will be repaid over 15 years. If you receive the whole $7,500 credit, you will pay it back at $500 per year for 15 years. A nice feature, though, is that the buyer doesn’t start repaying the credit until two years after the year in which they claimed the credit.
What if I sell the home in less than 15 years, before the credit is paid off?
The remaining balance would be due from the profit of the sale of the home. If you don’t earn enough profit on the sale, the balance of the credit payback would be forgiven.
So what are you waiting for? Even when the market is down, home prices will still appreciate more than the stock market! It’s time to get out there and buy the home of your dreams!! Contact your favorite local Realtor and get out there now!
Jean
Well, the market is all abuzz over the Housing and Economic Recovery Act of 2008′s new $7,500 Federal Tax Credit for First Time Home Buyers. And well it should be! Right now, buyers should be out there buying! Rates are low, there is an excessive amount of inventory to choose from, and with this new tax credit it is clear that the time to act is NOW! But everyone seems to have a different idea about what this credit is all about. I’ve written this article to highlight this new tax credit and shed some light on exactly what the benefits are to the First Time Home Buyer who takes advantage of this credit. Below are the most common questions I am asked regarding the new credit, along with an easy to understand answer.
Who is eligible for this credit?
The $7,500 credit is available to first time home buyers only (a first time home buyer is defined as a buyer who has not owned a home during the past three years.) If you are a U.S. citizen, file taxes, and fit the definition of the first time home buyer, you are eligible to participate!
Are there any income limitations?
Yes. For a single individual (or head-of-household) the modified adjusted gross income (MAGI) must be less than $75,000. For a married couples filing a joint income tax return, the income limit is $150,000.
Single or head-of-household taxpayers making between $75,000 and $95,000 are eligible for a partial first-time home buyer tax credit. Married couples making between $150,000 and $170,000 are eligible for a partial first time home buyer tax credit.
What if I pay less than $7,500 in income taxes? Do I lose some of my credit?
No! The tax credit is refundable, meaning that if you pay less than $7,500 in taxes, the government will write you a check for the difference! As an example, if you owed $6,000 in federal income taxes, you would pay NOTHING and receive a check for $1,500 from the government. Another great example would be if you are due to receive a refund of $2,000 from the government. That refund would grow to $9,500 (the $2,000 original refund amount PLUS the $7,500 tax credit!)
What are the effective dates?
You must purchase a home after April 9, 2008 and before July 1, 2009. The home buyer must actually make settlement on the home during this time period.
What types of homes qualify for the tax credit?
Single family homes, townhomes, and condominiums all qualify, assuming that the home will be used as the primary residence and the buyer hasn’t owned a home in the prior three years.
Do I have to pay back this credit?
Yes, the credit is basically an interest free loan which will be repaid over 15 years. If you receive the whole $7,500 credit, you will pay it back at $500 per year for 15 years. A nice feature, though, is that the buyer doesn’t start repaying the credit until two years after the year in which they claimed the credit.
What if I sell the home in less than 15 years, before the credit is paid off?
The remaining balance would be due from the profit of the sale of the home. If you don’t earn enough profit on the sale, the balance of the credit payback would be forgiven.
So what are you waiting for? Even when the market is down, home prices will still appreciate more than the stock market! It’s time to get out there and buy the home of your dreams!! Contact your favorite local Realtor and get out there now!
Jean
