Let Uncle Sam Help You Buy Your First Home!
H.R. 3221, the "Housing and Economic Recovery Act of 2008," Was signed by The President on July 30, 2008. It included a great benifit for first time home buyers!
The tax credit is for 10% of the purchase price, up to $7,500, but phases out for higher-income homeowners. Homebuyers who file as single or head-of-household can claim the full $7,500 if their adjusted gross income is less than $75,000. For married couples filing a joint return, the income limit doubles to $150,000.. Homeowners are eligible for the tax credit if they have purchased a home since April 8, 2008 or make a purchase before July 1, 2009.
This is a tax credit, not a deduction.. It reduces the homeowners' tax bill by up to $7,500 for the tax year in which the purchase was made. If you pay less than $7,500 in federal income taxes, then the government will write a check for the difference in the same manner as an overpayment of your taxes. If a house is purchased this year, a tax credit for the 2008 tax year can be taken with a filing deadline of April 15, 2009. If a house is purchased next year by the end of June, a tax credit for the 2009 tax year can be taken in the April 15, 2010 filing. It's a one-time credit; you don't get to keep taking it year after year.
There is a catch, and that is that the money has to be repaid over 15 years, starting two years after you buy the house. That makes the tax credit an interest-free loan. If you take the full $7,500 tax credit, your income tax bill will increase by $500 a year for 15 years. If you sell the house before then, you'll have to pay Uncle Sam the remaining balance.
So, if you have been on the fence about when to make an offer. Take advantage of the great prices and a $7,500 loan which can be used toward your downpayment!
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