The economic stimulus bill that President Obama signed on Tuesday provides a huge benefit to homebuyers who purchase a home this year between January 1 and November 30. First-time buyers can claim a credit worth $8,000, or 10% of the home's value, whichever is less, on their 2008 or 2009 taxes.
A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000, even if their total tax bill was less than that amount. To qualify for the credit, the purchase must be made between January 1, 2009 and November 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyers. They must also live in the house at least three years, or they will be obligated to pay back the credit.
Additionally, there are some income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. Higher income buyers may receive partial credit. Taxpayers who have already completed their returns can find amended returns for 2008 to claim the credit.
This plan improves greatly on the current $7,500 tax credit, which was created in last year's Housing Act. With that tax credit, buyers had to repay the tax credit back to the government over a period of 15 years, or earlier if the house was sold.
Many may look at the tax credit as a discount on a home's price. A $100,000 purchase effectively becomes a $92,000 one. This should reassure buyers apprehensive about purchasing and then watching prices continue to fall. It can also provide a nice nest egg for unforeseen repairs and expenses that may crop up in a homeowner's future. Recipients could also use the money to furnish their new homes, another nice boost for the economy.
Interest rates are still incredibly low, and with this tax credit, it has become perfect timing for first-time buyers to jump into the housing market.
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