Most everyone has now heard of the new tax credit for first-time homebuyers. I thought it might be helpful to pass along some follow-up information on the details.
-This is being touted as a tax credit that reduces the amount of income tax owed dollar for dollar, rather than a mere deduction. (It is really more of an interest-free loan - see below.)
-It is good for up to ten percent of the purchase price of the home or $7,500 -- whichever is less.
-It is for principal residences only and the purchase must close between April 9, 2008 and July 1, 2009.
-First-time homebuyer is defined as someone who has not had ownership interest in a principal residence in the three-year period before the date of the current purchase.
-There are certain income restrictions, which your CPA will be glad to explain.
-Key point: buyers will repay the credit in fifteen equal installments on their federal income tax return, beginning the second year after they buy the home. If they sell the home before the fifteen-year payback window, whatever they still owe is due that tax year... unless the profit from the sale is less than the original credit. In that instance, just the amount of the profit is due, with the remainder of the credit forgiven.
No doubt your CPA is mulling over this new tax provision right now, hoping that you'll call for additional information....
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