First time homebuyers really have incentive if they buy real estate between April 9, 2008 and July 1, 2009
If you’re a first-time homebuyer, OR if you (and your spouse) haven’t owned a home for the last three years, you qualify for up to a $7,500 tax credit. (The credit equals 10 percent of the home’s sales price, up to $7,500.) That means if you owe the government $3,000 in taxes this year, you’d pay nothing and get a $4,500 refund!
This tax credit, or Housing and Economic Recovery Act, applies to primary residences purchased between April 9, 2008 and July 1, 2009. Even if you already own a lot, you can get the tax credit if you start building your home (though you must occupy it by July 1, 2009). All you have to do is claim the credit on your 2008 or 2009 tax return.
But, the credit is meant to stimulate the economy, rather than give people free money; buyers must begin paying back the credit — given interest free — two years after they claim it, and they have 15 years to pay it back.
That means you’ll owe $500 extra on tax returns for the next 15 years. If you sell the home before then, the balance is due the year of the sale (but here’s a morbid bonus: If you die, inheritors will not have to pay back the credit you received, and if you don’t make a profit on your home, you won’t owe the balance). So, it’s really an interest-free loan that allows buyers to save the $4,200 they’d be paying in interest with a 15-year loan rate of 7 percent.
Singles who make $75,000 or less of modified adjusted gross income* or $150,000 jointly are eligible for the full $7,500 credit. Those who make between $75,001 and $94,999 (or $150,001 to $169,999 jointly) still qualify for a portion of the $7,500 credit. Earners above those limits do not qualify for the tax credit. (*modified adjusted gross income is determined by taking one’s annual income, and subtracting certain deductions, not including itemized deductions and personal exemptions.)
For more information on the tax credit, please contact me; I’d be happy to answer any questions you have.
