Let's first define "First-Time Homebuyer". Actually, let's define what the heck I'm addressing in the first place. It's the First-Time Homebuyer Tax Credit. I trust you've at least heard about it and if not... no biggie... I will give you some of the talking points and the direct address to the site momentarily.
The whole concept of "First-Time Homebuyer" can be a tad misleading for some of you. You are considered a first-time homebuyer (under this tax credit) if you have not owned another home at any point in time during the three years prior to the date of purchase.
So what is this Tax Credit all about?
- It acts like an interest free loan because it must be repaid over a 15-year time frame. If you die, don't worry about it as long as you filed your taxes individually. If you filed a joint return, it's up to wifey or hubby to pay this interest free loan. Death, like life & love, can cost money:)
- This only applies to primary residences in the United States of America. Sorry, the vacation house in Greenwich, Connecticut doesn't qualify. As far as that Villa in Italy, count that out as well. Feel free to drop me a bottle of Chianti in the mail, though. It's got to be your home... the very roof over your head. On a personal note, I do believe we'd be better off if when buying a home... we'd consider it more than an "investment". It's where you live folks! Investments, for most of us, happen over time. I ain't (love that word) no day trader or speculator. And I never will be.
- What's the time frame? You buy the home after April 8th, 2008 and before July 1st, 2009. Let's face it, we have low interest rates and a large inventory and considering it is a buyers market in a lot of areas... it may be a damn good time to go ahead and buy that home. Historians may look back to this period of time and wonder what the fuss was with not wanting to committ, waiting for a more opportune time. There may be NO more opportune time than now. Of note, the preceding is a sales pitch delivered by folks to increase business and consumer confidence. The same can be written about all the bad news flying around. Don't think that news organizations aren't rolling in dollars about how much "bad news" is being reported.
- How much is the credit? Quite simply, 10% of the purchase of the home, a maximum available credit of $7500.00 worth of dead presidents.
- How will the IRS know if someone sells their residence before the 15 years are up? I gotta laugh at this question, though it isn't a stupid one. In my mind, the only stupid question is one not asked. To answer this, the website says the following: "Through both self reporting and third-party information." Right, how ripe. Without imposing political beliefs upon the masses, they will know. While I believe in conspiracies, this isn't one in my book. This is intelligence, the right kind. I know folks who blatantly took advantage of the system, good for you. Just don't bitch because we are all in a bundle. YOU were just as responsible...
- It's repaid, but how? After the second year of claiming the credit, you must repay that interest free loan. From what I've read, you will be repaying as an additional tax on your returns for the next 15 years.... $500.00 a pop.
One more thing, before I present the second thing which will end up "lastly". Real Estate Investors have been stifled because of all these happenings in the Mortgage World. Personally, I think that is a mistake. They say you can only own so many properties and your credit score has to be this and your mother has to a direct decendent of Henry the freaking 8th? Some folks invest in Real Estate for a living, don't ignore them. Keep that in mind PMI Companies and Credit Scoring Agencies, because I bet ya that you won't be running this industry much longer.
Lastly, and my English Teacher hated starting a sentence like that which is one of the reasons I just did... it's a buyer's market. That doesn't mean it is right for you, yet it is most certainly something to explore. In a few years, if you didn't pounce on this, you may just be making someone else a lot of money... who owns your home.
Direct website @ http://www.irs.gov/newsroom/article/0,,id=186831,00.html
Have some fun @ http://www.youtube.com/watch?v=tfBoMV-HIP4
Sardi
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