As you've probably heard, the First Time Homeowner's Tax Credit changed from $7500 to $8000 back in February. This is great news for qualifying Buyers. Here are 3 important points to remember:
•1. With the old plan, the $7500 had to be paid back over 15 years-or at the sale of the home, whichever came first. This made it essentially an interest-free loan. The $8000 tax credit does not have to be paid back!
•2. The $8000 is a tax credit, not a tax deduction. What's the difference? With a tax credit, you actually get the full amount of money-dollar for dollar. For example, if you owe $7000 on your taxes, with the tax credit, you would get $1000 back ($8000 minus the $7000 you owe leaves you with $1000). With a tax deduction, you take the percentage rate of the tax bracket you happen to be in and multiply it by the $8000. Whatever that number is, that's the amount you can subtract from the amount of income tax you owe. In this example, if you owe $7000 and you are in the 15% tax bracket, you would take 15%of $8000 which is $1,200 and subtract that from the $7000 that you owe. This leaves you responsible for $5,800. The tax credit is a much better deal!
•3. Homes that are purchased on or after January 1, 2009 and before December 1, 2009 will be eligible for the $8000 Tax Credit .
For more information about this Buyer incentive, check out the FAQ page here
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