1. Tax Credit is 10% of the purchase price up to $7,500. The buyer receives a tax credit on their personal income tax return in the calendar year they close on their home. Currently this tax credit is paid back starting the next tax year in $500 increments over a 15 year period. If the home is sold before the 15 year period the balanced owed is paid back when the home sale closes, unless the home sells at a loss at which point the balnace is forgiven.
2. First-time homes buyers only qualify. 1st time homebuyer is defined as anyone who has not owned a home at any time during the past three years. Certain income limits apply but the amount of credit is the same whether married or single.
3. Income Limits: Buyers using Form 1040 filing status single or head of household are eligible if their income is no more than $75,000. Joint filers income can be no more that $150,000.
a. Buyers with income between $75,001 - $94,999 (Single) or $150,001 - $169,999 (Joint) can receive a partial tax credit.
b. Buyers with income over $95,000 (single) or $170,000 (joint) are not eligible for the credit.
4. The home must be purchased between April 9, 2008 through July 1, 2009.
*Currently, Congress is discussing raising this limit to $15,000. We are anticipating the structure of the credit to remain as noted above, however they are also discussing the possibility of making the $7,500 a one time tax deduction and not requiring it to be paid back.
**The payback without interest is in equal installments of 6.67% of the total credit each year over a 15 year period beginning the year after the tax credit is claimed.
***You should always consult a professional tax advisor for exact tax calculations and tax advice.
Also you need to consider the risk of trying to time the market. If your Sales price goes down but the interest rate goes up, your monthly payment will actually be higher on the lower sales price/higher interest rate combo.
Hope this information helps with your decision.
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