August 28th, 2008

It is rare for me to quote someone else's blog in full detail. However, Greg Moore is helping many Americans escape from the Debt Paradigm and his emails are always worth reading. I hope this one inspires... 

Dr Agon Fly - www.YouBetheBank.com

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Getting Into the 0% Interest Loan Game... 

The U.S. Government is getting into the 0% Interest Loan Game. Actually, if you consider income tax refunds are really 0% loans taxpayers make to the government, the government is already in the 0% game.

Only this time, instead of you receiving 0% on money you lend to the government, the government will lend you money at 0%. 

I'm referring to the new Housing and Economic Recovery Act of 2008, specifically, the "First-Time Home Buyer Tax Credit" portion of this bill. 

You can read the "current" details of this provision here: http://www.federalhousingtaxcredit.com/ 

I say, "current," because, as you'll read, some  details are still being worked out. 

In a nutshell, the FTHBTC provides a "refundable" tax credit up to $7,500 for first-time home buyers on homes purchased between April 9, 2008 and July 1, 2009. 

Tax credits reduce your tax liability dollar for dollar, so, for example, if you have a $10,000 tax liability and you were eligible for - and took - all $7,500 of this credit, you would only owe $2,500.  The "refundable"

part means you will receive this credit even if you have no tax liability. If you owe nothing, you will receive a check up to $7,500. If you expect a refund, your refund check will be increased by the amount of the credit. 

Now, before you begin scheming on all of the ways you can put this credit to work in your debt-elimination, wealth-building, or flat screen TV plans... wait! 

The amount of your credit must be PAID BACK over a period of 15 years. "Tax-credit" in this case means you have an IRS loan at 0% for 15 years. 

This is just a wee bit different than a traditional tax-credit... 

Michelle Singletary, personal finance columnist for the Washington Post had a few questions for an IRS spokesperson... 

Michelle: Since this is a loan from the IRS, will the IRS be sending an annual loan statement to taxpayers? 

IRS: The details of how the IRS will collect this money or inform people have not been worked out. A line would probably be added to the standard 1040 tax form to indicate that the credit should be paid as part of your tax liability. 

Michelle: Can I pay off the loan early? 

IRS: The IRS hasn't yet come up with a system to accommodate an early payoff. 

Michelle: What happens if someone does not pay back the debt on time or at all? 

IRS: The unpaid loan will be treated like any delinquent tax obligation, meaning standard IRS interest and penalties apply. 

Yep. Just like any 0% loan you default on, the 0% rate disappears, which places it in the same category as 0% credit cards, with one exception... 

Do you really want to have the IRS as a creditor?

Greg Moore is the Architect of the Debt Freedom System, ‘DebtIntoWealth - Lessons from My Journey to Debt Freedom."

http://www.debtintowealth.com/debttrap.html

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