Special offer

$7500 Tax Credit for First Time Home Owners

By
Real Estate Agent with Realty Five of Defiance

If you you have been considering buying a home for the very first time and you live in the Defiance, Ohio area then you need to read the information listed below about the new tax credit available for first time homebuyers.  If you have any questions just contact me and I'll help you out.

$7,500 First-Time Homebuyers Tax Credit Overview

The Housing Bill (H.R. 3221) signed into law by President Bush in July offers first-time homebuyers a tax credit equal to 10% of the cost of their home up to $7,500. This tax credit is available to first-time homebuyers who purchase a home in the United States as their principal residence on or after April 9, 2008, and before July 1, 2009.


To qualify as a first-time homebuyer, the buyer cannot have owned an interest in a principal residence in the past three years from the date of the qualifying purchase.

To qualify for the full amount of the tax credit, the buyer must earn no more than $75,000 if filing as Single or Head of Household. If filing a Joint return, the buyers may have a combined income of no more than $150,000. There is a phase out of the credit if reported income is more than $75,000. Consult with a tax advisor to see how much of the tax credit your buyer could qualify to receive.

The tax credit allows buyers to deduct the credit from their total tax liability for the year in which the credit is taken. So, if the total tax liability is $8,000 for 2008 and the buyer qualifies for the full $7,500 tax credit, deduct the $7,500 from the tax bill and the buyer only pays $500. Also, the tax credit is "refundable," meaning that the taxpayer can receive a tax refund if the credit is greater than the estimated liability. This means that if the total tax liability for 2008 is $4,000 and the buyer qualifies for the full $7,500 first-time homebuyer's tax credit, the credit would be used to pay the $4,000 tax bill and the buyer would receive a tax refund check from the IRS for the $3,500 difference. Consult with a tax advisor to see how the tax credit would impact the buyer's tax return.

This tax credit must be repaid. However, the repayment period is 15 years unless the home is resold before the end of that period, and there is no interest on the amount of the credit that is received. Repayment of the credit begins two years after the credit is claimed and is repaid in increments of 6.67% per year of the credit amount. Consult with a tax advisor to learn how the tax credit repayment plan works.

Essentially, the tax credit is a 15-year interest free loan from the government. Since money today is worth more than an equal amount of money in the future, the tax credit is a fantastic opportunity that a buyer cannot afford to miss. Money used to pay a tax bill and any refundable portion of the tax credit that is received can be invested to earn interest. Any interest earned is kept by the borrower after the principal has been repaid. Consult with a tax advisor or financial planner to understand how the tax credit can earn money for first-time homebuyers.

Comments (0)