First Time Home Buyer Information

First Time Home Buyer Down Payment Assistance

First Time Home Buyer Tax Credit of 2009

With the signing of the stimulus bill today, the first time home buyer tax credit is being expanded to $8,000 from the prior $7,500. It is also being extended and will be effective for purchases from January 1, 2009 until December 1, 2009. The best part is that this will be a true tax credit that does NOT have to be re-paid. I am leaving the information below as a reference for the first time home buyer tax credit of 2008. It is still not what I had hoped for, but it is a good start.

First Time Home Buyer Tax Credit of 2008

One of the most exciting new provisions of the Housing and Economic Recovery Act of 2008 is the First Time Home Buyer Tax Credit. The credit is designed to encourage first time home buyers to go ahead and make the leap to purchase their first homes. Combine this tax credit with the fact that home prices are at historical lows, and indeed it is an ideal time for many first time home buyers to purchase homes.

Here are some things to keep in mind:

The tax credit is available for homes purchased between April 9, 2008 and July 1, 2009

The credit amounts to 10% of the purchase price of the home not to exceed $7,500

A first time home buyer is defined as someone who has not owned a home in the last three years

Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit

The tax credit works like an interest free loan and must be repaid over a 15 year period

How does a tax credit work?

A tax credit is a special provision that reduces income tax liability on a dollar for dollar basis. When filing a tax return, you must include income items, deduction items and the number of exemptions, among other things, to figure your total tax liability. If your total tax liability ends up being $7,500, and you qualify for the full $7,500 tax credit, this credit would be applied and would wipe out all of the tax due. If your employer had already deducted the $7,500 from your pay checks throughout the year, you would receive a tax refund of $7,500.

Does the credit have to be repaid?

Yes, the credit does have to be repaid, so it is really more like an interest free loan. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a first time home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.

Conclusion:

For more information about the first time home buyer tax credit or other changes resulting from the Housing and Economic Recovery Act of 2008,just give me a call. I would be happy to assist you with your purchase of your new home!