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$8000 Tax Credit for First Time Homebuyers

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Mortgage and Lending with Right Start Mortgage (NMLS #35960) NMLS #19622

There's been a lot of talk about the $8000 Tax Credit for First Time Homebuyers. This is a terrific incentive and actually isn't only for First Time Homebuyers. You just can't have owned a home in the last 3 years.


The credit can be claimed on 2008 or 2009 tax returns. Homebuyers who get a loan backed by the Federal Housing Administration can use the money to cover closing costs and other fees.There are some creative tax planning strategies that the buyer can employ as well.

 

The tax credit, for home purchases made through end of November, comes with income thresholds, $75,000 for individuals and $150,000 for joint filers. After those limits, the credit begins to phase out. If you bought a home this year and expect your 2008 income to be lower than next year's, it makes sense to file for the credit this year using a 2008 amended return.


However, if you think your income will decrease, due to job loss, wage cuts or hour reductions, it makes more sense to file for the tax credit on your 2009 tax returns to get the most out of the credit, Meighan said.

 

Another benefit to waiting until you file your 2009 return is that you can increase your take-home pay. By taking the credit next year, you can change your tax withholding status with your employer now and get more on a paycheck-to-paycheck basis.


You'll be giving up a "fatter" tax refund next year, but each month you'll have more change in your pocket.


Also, don't forget to reduce your federal and state tax withholding to account for the tax deduction you can take on the mortgage interest and property taxes you pay.


Last month, the FHA said its borrowers can receive advances on the $8,000 first-time homebuyer tax credit from lenders, so they don't have to wait to get the money next year from the IRS. Borrowers will still have to come up with the FHA's required 3.5 percent down payment, but the advance from the tax credit can be applied toward closing costs, fees or to increase the down payment.