Finally some good news for the housing industry! The economic stimulus bill passed and is awaiting President Obama's signature on Tuesday, February 17th.
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.
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 Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples.
Applying for the credit will be easy. Just claim it on your tax return. No other forms or papers have to be filed.
The $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.
The credit could also create a domino effect because each first-time homebuyer sale will lead to two more trade-up transactions down the line. Sellers who were waiting to sell their old home to trade up may now have buyers for their old home.
Many may look at the tax credit as a discount on the home price. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling.
This package provides a nice nest egg for the early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home (a lawnmower, a rug, a sofa, etc) and in that way help stimulate the economy!