Many Realtors and Clients have inquired about the refundability for the First Time Home Buyer's Tax Credit as revised and enacted into law by the Congress and President Obama last week.. Below is how I see it: (Please keep in mind that anyone seeking this or any other tax credit and/or deduction should seek competant advice from a tax professional. I am not a tax professional) All that said lets go. In 2008 Congresss created a $7,500 First-Time Homebuyer Tax Credit. It was effective for First-time Homebuyers who purchased after April 8th, 2008 and would run through July 1, 2009. It could be taken on your 2008 or 2009 taxes regardless if the tax payer purchased in 2008 or 2009. The largest problem was that this credit would have to be repaid through payroll withholding and tax liability over a 15 year peroid of time. Many people considered it a debt and not a benefit. Allthoug in all reality is was a debt but is was an interest free debt, which of course, you do not see too often. All in all a pretty good deal if you could get it. Powerful groups such as the NAR, The Mortgage Bankers Association and the National Homebuilders Association began in 2008 to advocate to remove the repayment feature of the credit and extend the credit to the end of 2009. These advocacey groups also wanted the credit available to all homebuyers. Now, under the Stimulus Bill just passed by Congress and signed into law by President Obama, the proponets succeded in removing the repayment requirement for 2009. The credit was extended for sales competed through November 30, 2009. The amount of the credit was raised to $8,000 and credit is available for purchases made after Janujary 1, 2009. Sales in 2008 would have to take the credit under the old repayment requirement rule. The credit is still only for First Time Homebuyers and this is defined as an individual that has not owned a home in the last three years. The BIG news is the credit is REFUNDABLE up to 10% of the purchase price of the property. If the property purchase is $60,000 then the credit is for up to $6,000 and if the purchase is $135,000 then the credit is up to $8,000. For the rest of the examples herein please assume that the pruchase amount is over $80,000. When they say REFUNDABLE it means that if your total tax liability in the give year is less than $8,000 then the IRS is going to send a refund for the balance. The First-time Homebuyer is going to get a CHECK. That should help offset downpayments made and cost paid very handsomely. All this said it is also important to observe that many taxpayers do not have a tax liability that exceeds $8,000. For example a single filer would need $46,000 in taxable income to hve $8,000 in tax liability and a couple would need $58,600 in taxable income to have $8,000 in tax liability. All taxpayers that have less than this amount will get a check for the differenced. If you are fixed income and have no liability you will most likely get the full $8,000 check for the credit. In most cases the program will phase out for individuals making over $95,000 and couples making over $170,000. Other situations that would prevent the credit from being attained would be if you purchased the property from a close relative (spouse, parent, grandparent, child or grandchild), you stop using the home as your primary residence, yoiu sell the home prior to the end of three years from the purchase date, and if you are a non-resident alien. Other information that is important is that the new plan will allow you to take the credit on your 2008 Tax Return (Due by April 15, 2009), an amended 2008 Tax Return, or your 2009 Tax Return due in 2010. For all your answers and the exact text of the new credit please go to www.irs.gov . Another excellent resource is http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home?lid=renav0019 John Tuggle February 22, 2009
This entry hasn't been re-blogged:
Re-Blogged By Re-Blogged At
- Topic: Home Buying
Generate More Leads from this Listing
With a Trulia Pro Account
Find what you need?
See More Blog PostsAbout Real Estate! SEE MORE NOW!