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8,000 Reasons to Buy a Home

By
Real Estate Broker/Owner with ChicagoCityHomes - RE/MAX 10 Lincoln Park

gift, houseIt's been nearly a month since President Barrack Obama announced his Stimulus Plan, which includes an $8,000 tax credit for first time homebuyers.  Some critics claimed it wasn't enough, especially since original drafts of the plan included a $15,000 credit.  Other were disappointed that only first time homebuyers could benefit.  Builders of new homes were disappointed on both scores.  The plan as noted in the chart below has some income restrictions. The credit cannot be used as a down payment.  It doesn't have to be paid back. It will be applied against the homeowners' tax liability; if they owe less the $8,000 tax, they receive the rest back in a check from the government.

With its imperfections, will the plan help stimulate the housing market? The National Association of Realtors (NAR) thinks so; in fact the prestigious real estate group upped its estimate of how many would be helped from 200,000 to 900,000 over the past few weeks.

  

2008 Plan

2009 Plan

Effective Dates:

4/9/08 - 7/1/09

1/1/09 - 12/1/09

Amount of Credit:

10% of home cost up to $7,500

10% of home cost up to $8,000

Eligible Property

Any single family primary residence

No change

Refundable

Yes. Reduces or eliminates tax liability in the year of purchase. Taxpayer receives any unused credit.

No change

Income Limit

Full credit if adjusted gross income does not exceed $75,000 for individuals or $150,000 for couples. Reduced credits for AGIs up to $95,000 individual or $170,000 for couples.

No change

Who is a First Time Homebuyer?

Purchaser (and spouse) who has not owned a home within the last three years

No change

Revenue Bond Financing

No credit allowed if home financed with state/local revenue bonds

Credit allowed if home financed with state/local revenue bonds

Repayment

Yes, over 15 years with annual payments of 6.67% of credit

No repayment!

Recapture

If home is sold within 15 years, remaining balance to be repaid will be deducted at sale

If home is sold within 3 years, entire credit will be deducted at sale

 

To any first time buyer with good credit and a stable income who questions the value of this credit, I say two words: "Get real."  When is the last time someone offered you $8,000 that you didn't have to pay back?

When people move into a new home, some new dynamics come into play.  Especially if you embrace homeownership after apartment living, you may find your monthly outlay for utilities much higher than expected - especially if utilities were included in the rent.  As a homeowner, you are the one responsible for the hot water heater that suddenly dies or the refrigerator that conks out.  The new tax credit doesn't function like an ATM where you can withdraw money when you need it.  However, if you reduce your withholding, the anticipated tax credit can help you ease into higher home operating coschicagocityhomes logots and provide for unplanned emergencies.

In addition, $8,000 can fund some of the needs and desires you may have as a new homeowner.  The amount won't allow you to remodel a shack into a palace, but it will cover new appliances or new carpeting or some new furniture.  If you don't have the cash, you might be able to buy some of these things on a deferred payment plan offered by many stores.  Without adding to your Mastercard or Visa bills, you can pay off the balance with your tax credit funds.

The credit is good through December 1, 2009, so now is the time to visit Chicagocityhomes.  Karen Breen Elia and Louis Elia will help you locate an affordable first home in Lakeview or one of the many other intriguing Chicago neighborhoods.

Posted by

breenelia team

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Show All Comments Sort:
Matt Liistro
National Credit Fixers - Matt Listro - Bridgeport, AL
Your Credit Repair Expert

One important point I would like to add:  You can get your $8,000 immediately by taking the credit on your 2008 tax return --> you don't have to wait until you file next year.  For example - you have a client who purchases their home and closes on Sept. 12, 2009 (yes I am projecting here) - all they have to do is file an amended 2008 return and they can get the $8,000 right away!

Think about the possibilities --> could your client borrow the downpayment money from mom and dad or a sibling and then pay them back a month after the closing?  I am not advocating anything unethical here - I am suggesting you document a loan to the borrower for the $8,000 from a family member then the loan will be repaid later --> all perfectly acceptable!

You can read more about the $8,000 credit here on my blog.

:)

Mar 11, 2009 07:13 AM
Karen Breen Elia
ChicagoCityHomes - RE/MAX 10 Lincoln Park - Chicago, IL
ChicagoCityHomes

Thanks for the insight, Matt.  I will definitely pass this along to a few of my fence sitters!

Mar 11, 2009 08:05 AM
Brian Guzman
Coldwell Banker - Chicago, IL

Is this a specific amendment document from the 5405 tax form or a general tax amendment?

Mar 12, 2009 05:14 AM
Debra Kukulski, Broker Associate
RE/MAX Suburban - Cary, IL
SRES;SFR,CDPE;GRI;ABR;e-PRO Realtor, Northern IL

Karen, We need to get the word out about this fabulous tax credit incentive for first time home buyers who purchase homes in 2009! Great job!

Mar 16, 2009 03:14 AM
Anonymous
Karen Breen Elia

Thanks for your kind thoughts, Debra

Mar 16, 2009 06:58 AM
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