As part of the Housing Stimulus Bill, Congress created a tax credit for first time home
buyers who purchase a home prior to July 1, 2009.
What is the tax credit? Eligible tax payers will receive a "refundable" credit of up to $7,500 or
10% of the purchase price of their home, whichever is less. A refundable credit means you will get
the entire amount of the credit, even if it exceeds your tax liability.
Who is eligible? Any person who has not owned a principal residence in the three years prior
to closing who meets the income limitations-$75,000 for individuals and $150,000 for married couples.
In the case of married couples, both spouses must be first time buyers. Individuals with incomes up to
$95,000 and married couples with incomes up to $170,000 can receive a partial credit.
How do I qualify? If you meet the definition of "first time buyer" and the income qualification
set out above, you must purchase and close on a home prior to July 1, 2009. Houses, Condominiums
and Manufactured Homes all qualify for the credit.
How do I get the money? You will receive a credit against your 2008 or 2009 Federal Income
Tax. The credit will reduce your tax bill and increase the amount of your refund. In order to increase
cash available for your down payment/closing costs, have your employer adjust your withholdings
now.
Do I have to pay the money back? Yes-but not immediately. The credit is really an interest
free loan for up to 15 years. The credit must be repaid at a rate of 6.67% per year starting two years
after the purchase, with any unpaid balance due at time of sale. If you receive the full $7,500, you
can repay the credit by increasing your Federal withholdings by $20 per paycheck.
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This summary was prepared by Thomas Richardson, Esq., counsel for Liberty Title. It is a general summary of the tax credit. Individuals should consult with their counsel or tax advisor as to their specific situation.
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