Since HR3221 went into effect on July 30th, there's been enough nationwide analysis and debate to make even a Palm Harbor Real Estate professional's head spin! Today, let's focus on one wonderful little piece of that legislation - the $7,500 tax credit!
Am I Eligible?
- The $7,500 tax credit is for first-time home buyers only for any home in the U.S. If I haven't owned a home in the past 3 years, I qualify!
- I must be a U.S. Citizen and file my taxes.
Will the Palm Harbor Home I'd Like to Buy Qualify?
- Any Tampa Bay home qualifies as long as it's my principle residence.
Do I Earn to Much Money to Qualify?
- Dunedin home buyers filing as single or head-of-household can claim the full $7,500 if my adjusted gross income (AGI) is less than $75,000.
- Married couples filing jointly can double that to $150,000.
- Single or head-of-household taxpayers who earn between $75,000 and $95,000 are
eligible to receive a partial credit. - Married couples filing jointly who earn between $150,000 and $170,000 are eligible to receive a partial credit.
- If my AGI is greater than the limits above, I am out of luck.
When Must I Buy My Palm Harbor Home?
- I need to have closed on the purchase of my home on or after April 9, 2008 and before July 1, 2009.
Will the IRS Write Me a Check for $7,500?
- If I pay less than $7,500 in taxes for the year, then they IRS will cut me a check for the difference. For example, if I owe $5,000 in taxes, I will pay nothing to the IRS and they will cut me a check for $2,500. Or, if I am due to receive a $1,000 refund, my refund will grow from $1,000 to $8,500. SWEET! (We'll ALL be paying for it in other ways but let's not digress!)
- If I purchased my home in 2008, the credit must be claimed with my 2008 tax return. If I plan to buy my Palm Harbor home in 2009, then I have the option of filing it either with my 2008 or my 2009 tax return.
The Catch .... Payback Provisions
- The tax credit is an interest-free loan that must be repaid over 15 years.
- The minimum repayment amount must be 15 equal annual installments. For example, if the credit amount is $7,500, then I must repay a $500 each year for 15 years.
- If I didn't take advantage of the tax credit and borrowed that same $7,500 from my mortgage lender at 6% for 15 years, I would pay $11,392.96 of interest in addition to repaying the $7,500 principle!
- I must begin repaying the credit two tax years after claiming the credit.
What Happens When I Sell My Palm Harbor Home?
- When I sell my home for a profit, then I must repay the remaining credit during the tax year I sell my home. The amount of of my repayment depends upon the amount of profit from the home sale:
- If the profit on the sale is more than the remaining credit, then I must repay the entire remaining credit.
- If the profit on the sale is less than the remaining credit, then I must repay an amount equal to the profit on the home sale. The remaining credit payback will be forgiven.
- If I sell the home but did not make any profit on the home sale, then the remaining credit payback will be forgiven.
Oh, The Silly Disclaimer
As always, please don't construe this article as legal, accounting or tax advice. Always contact a tax accountant for advice specific to your situation. That being said, we think you'll be hard-pressed to find a professional that says this isn't a fantastic opportunity for free money!
How Do I Get Started?
It's easy. Give us a call at (727)366-0324 or contact us here to start your Tampa Bay home search today. Of course, you can also search the MLS like a Realtor!
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