This article was originally posted on DothanHomeSearch.com
Part of the new economic stimulus package just signed by President Obama aims to stimulate the housing market. This post is not to debate the merits of the plan, or even this specific provision of it. The purpose of this post is to give you, our Dothan area home buyers, the information you need to be able to take advantage of the $8,000 tax credit. Here is everything you need to know.
Who gets to use it?
First-time home buyers are eligible. First-time home buyers are defined as the folks who have not owned a home in the three years prior to purchase. In addition, the credit begins to phase out for purchaser’s making over $75,000 ($150,000 joint return) a year. The credit disappears at the $95,000 ($170,000 joint return) income level.
What kind of house can you buy?
Any single-family residence that will be used as your primary residence is eligible.
How much of a tax credit will I get?
The credit is for 10% of the purchase price of your home, up to $8,000. For any home under $80,000, you would get a 10% credit. Over $80,000, and the credit is the full $8,000.
How does this tax credit work?
Basically, this credit goes toward your Federal income tax bill for the year. So, when you fill out your tax return early next year, you will be able to deduct this credit from the income tax you owe. Look at your tax return for 2008, or, if you haven’t completed it yet, look at your return from 2007. Look for the line that shows the total tax you owed (Line 61 on Form 1040, Line 37 on Form 1040A). You will get to deduct 10% of the purchase price of your home, up to $8,000, off of this amount. There will be a line in the “Payments” section of your return to do this. If you didn’t owe that much in taxes, then you get whatever is left as a refund! Keep in mind that when we talk about taxes owed, we are talking about your total Federal income tax bill, not any amount that comes up in the “Amount You Owe” line of your return.
Do I have to pay it back?
No. Not for any home bought after January 1, 2009 and before December 1, 2009. There is a recapture clause, which states that if the home is sold within three years of purchase, the entire amount of credit is recaptured on sale. This applies only to homes purchased in 2009.
Any way you look at it, this is a pretty sweet deal for home buyers. We’ve got a strong team of REALTORS® waiting to answer your questions and help you find a home.