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Important information about the HERA Tax Credit for Buyers and Agents

By
Real Estate Agent with VanDorm Realty

Here is some great information I thought valuable to pass along, it was sent to me from Mike Nichols from Venture Bank Motrgage Services!

Let's Talk about the HERA Tax Credit  
I have heard a lot about how the HERA Tax Credit is helping move homes. I want to make perfectly clear that it is a great tool; but, it's not free.   The recent passage of the Housing and Economic Recovery Act brought forth big buzz in regards to the $7500 tax credit that will be provided to homebuyers. Let's review this subject in a bit more detail since January 31 is just around the corner!

First, in order to claim and receive the tax credit, the filer(s) must be first-time homebuyers and they must close on the purchase of the home between April 9, 2008 and July 1, 2009. The actual tax credit will equal 10 percent of the purchase price for a maximum amount of $7500. If the return is filed for married persons, each spouse will receive up to $3750 credit.

A first-time homebuyer is defined as a person who has not had ownership in real property as a primary residence for the previous three-year period prior to settlement on the purchase. For a married couple, both histories are taken into consideration. If either borrower owns or has owned a second home, vacation home or investment property in the prior three years, they are still eligible as long as they did not own a primary residence.

Sounds like a great deal, right? Sounds like a great incentive to stimulate our crumbling housing market and keep realtors employed? Well yes if you or your borrower qualifies to receive it!

First off, the credit isn't just free money. It's actually an interest-free loan that is repayable over the following 15 years. So for a credit totaling $7500, you would need to deduct $500 from each of your tax return filings for the following 15 years.

Second, if the homebuyers purchase the home using any home loan program connected with state-revenue bond funding, they are not eligible to receive the tax credit whatsoever. With the cease of seller-funded downpayment assistance programs, many borrowers are purchasing homes utilizing special state-specific programs that offer grant funding for downpayment assistance and closing cost credits.

Third, if the single borrower's gross adjusted income exceeds $75000 or joint borrowers' gross adjusted income exceeds $150,000 total, the amount of tax credit starts to phase out and the amount lowers. For single borrowers whose gross adjusted income exceeds $95000 and joint borrowers whose gross adjusted income exceeds $170,000, the tax credit eligibility no longer applies.

A few other notes of importance:

· A borrower who constructs a home on land he/she already owns is eligible for the credit as long as he/she has not owned any other real property as a primary residence in the prior three year period. The borrower must take occupancy of the newly constructed property between April 9, 2008 and up until July 1, 2009.

 

· Single family detached, attached, condominiums, manufactured homes and houseboats qualify

 

· There is no special claim form or application process. The tax credit is something the qualifying party will be able to claim within their federal tax return when they file in 2008 or 2009.

 

· For purchasers in the District of Columbia, only one tax credit may be claimed for first-time homebuyers. They may not claim the existing DC credit in addition to the HERA tax credit.

 

· Permanent and non-resident aliens are eligible in addition to U.S. Citizens as long as they meet the definitions explained in IRS Publication 519.


So for realtors and originators, it's important to know and understand the various provisions associated with the HERA tax credit. For those buyers who meet the eligibility criteria, this tax credit could be a great benefit

  Michael Nichols Venture Bank Mortgage Services 253-576-7228   Always Here For You!

Comments (9)

Keith Elliott Jr
KEIRE Realty Group - Manassas, VA
Principal Broker/Owner

Hello Trish,

Welcome to Active Rain and congrats on your first post! The opportunities to learn and network are incredible here. Best of luck to you!

-Keith

Dec 03, 2008 10:41 AM
Greg Steffens
Mountain Country Realty - Lake Arrowhead, CA

Welcome to Active Rain and congrats on your first post.  Be sure to spend some time looking around at what and how others are blogging here - it is a great education and lots of fun.  Looks like you're off to a great start...keep it up!

Dec 03, 2008 10:49 AM
Sergio Rebollo Jr.
Real Estate TeamMates - Miami, FL

Trish....Welcome to ActiveRain.  This is a great community to network with others as well a great place to learn from other's experiences and knowledge.  I've enjoyed it; I hope you enjoy it as well.  Congrats on your first post.

Sergio Rebollo Jr.
Exit Prime Realty
Coral Gables, FL  33134
305-582-4062

Miami Short Sale Specialist - Profile

Dec 03, 2008 12:27 PM
Yvette Gardner
Keller Williams Realty, Spartanburg, SC - Spartanburg, SC

Welcome to the Active Rain community. This is a great site with lots of information.  Have fun with it and hope to see more of your blogs soon! 

Dec 03, 2008 11:18 PM
Dan Magstadt
Paramount Residential Mortgage Group, Inc - Lake City, FL

Congrats on your first post - Welcome to ActiveRain!!

DM

Dec 04, 2008 01:54 AM
Kirk Westervelt
Van West Realty - Greenville, SC Realtor -Short Sale Expert! - Greenville, SC
Kirk Westervelt, Broker In Charge, Van West Realty - CDPE - Short Sale Agent - Home for Sale - Greenville, Simpsonvil...

Hello and welcome to Active Rain! I encourage you to learn from others, share your knowledge and experiences with all of us, enjoy yourself, and try to log in and join us in the Active Rain community as frequently as possible. I look forward to your future blogs and comments! Take care, --Kirk.

Dec 04, 2008 06:44 AM
David Painter
Keller Williams Realty - Spartanburg, SC

Good to have you on Active Rain.  This is a good site for gathering information and interesting to see what others are blogging about.

Dec 04, 2008 10:20 AM
Bill Kennedy
Keller Williams Greenville Upstate - Greenville, SC
Homes For Sale Greenville SC

Welcome to Active Rain! This is a great website for building your business, as well as learning from others.  Pat yourself on the back, because you made a GREAT choice in joining the blogosphere!

Write often, and write whatever comes to mind.  Blogs about personal topics and non-real estate items are often the best.  It helps your readers to bond with you, and ends up bringing you a lot of business!

Good luck with your future blogging.  If you'd like more info on points in Active Rain, I wrote a blog about it (click here). Feel free to ask me any questions if you need a hand!

Dec 05, 2008 01:46 PM
Vickie Roberts
First Security Bank - Owensboro, KY

Trish... Great information on the HERA Tax Credit!

Dec 10, 2008 11:33 PM