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Using the First Time Homebuyer Tax Credit to Motivate Buyers
WHAT IT IS. The 2008 Housing Act gives first time homebuyers a tax credit of up to $7,500 if they close on a home between April 9, 2008 and June 30, 2009. The actual amount of the incentive is 10% of the purchase price up to a maximum of $7500. Note that this is a tax CREDIT not a tax deduction. This means that the gov't will give up to $7,500 to the qualifying first time buyer. To the extent that the credit exceeds any tax due, the gov't will send the buyer a check. WHO QUALIFIES. To qualify for the credit, the buyer cannot have owned a principal residence in the U.S. in the three years prior to the purchase. Also, the credit is phased out for individual tax payers with an adjusted gross income (AGI) between $75,000 and $95,000 ($150,000 and $170,000 for joint filers). THE PAYBACK. The tax credit is actually a 15 year interest free loan. In the second year after purchase, the buyer must begin to pay back the credit/loan in equal installments over the next 15 years. If the buyer sells the home or it ceases to be the buyer's primary residence, before complete repayment ... more
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