The new First-time home buyer tax credit as we understand it here at NP Dodge...
FIRST-TIME HOME BUYER CREDIT If you are a first-time home buyer, you are eligible for a refundable tax credit equal to 10 percent of the purchase price of your home, up to $8,000. Here are some of the details contained in the 787 billion dollar "American Recovery and Reinvestment Act" which President Obama signed on Tuesday in Denver:
- The fact that the credit is "refundable" means that the tax credit refundable, or claimable regardless of your tax liability
- You must make your home purchase after Jan. 1, 2009, but before Dec. 1, 2009.
- You may purchase a new or an existing home.
- Unlike a similar $7,500, zero interest, fifteen year loan called a "tax credit" that Congress provided last year, you don't have to pay this one back. It is a true tax credit.
- The new credit, however, does phase out for individuals with incomes over $75,000 or married couples with incomes over $150,000 who file their taxes jointly.
- Also, you forfeit the credit if you sell the house within three years.
- "First-time homebuyer" is defined as someone who has not owned a home for the past three years.
- You may participate in a mortgage revenue bond program such as NIFA and still be eligible for the tax credit.
Although this is not tax advice and first-time home buyers are urged to consult their tax advisors, here is an example of how the First-Time Homebuyer Tax Credit could work for you:
Assume you are a couple making less than $150,000 annually, you purchase a house for more than $80,000 before December 1st of this year and you otherwise qualify for the full $8,000 tax credit. If your 2009 federal taxes were $12,000 without the tax credit, the $8,000 tax credit would lower your federal tax liability to only $4,000. If you had 2009 federal withholdings of exactly $12,000, you would have received no refund without the tax credit because your federal income taxes equal your federal withholdings exactly. But with the first-time home buyer tax credit, you will get a tax refund of $8,000.
"We at NP Dodge Real Estate feel the first-time homebuyer tax credit is a very great stepping stone toward restoring the national housing market and that it will spur greater activity among buyers here locally. When a first time home buyer purchases a home, the seller of that home can then purchase another home. Then seller of that home in turn can buy another, and that creates a cycle that moves us in the right direction. Home prices should stabilize and then begin to increase. This in turn will help increase consumer confidence. All of this will bring still more buyers into the real estate market. This is most definitely the time for first-time buyers to get their piece of the Great American Dream of home ownership." ~ NP Dodge Research and Stats Division Members