With the passage of the “Housing and Economic Recovery Act of 2008” you may be entitled to a tax credit of 10% of your purchase price up to a maximum of $7,500.
Before you go spending this windfall let’s take a look and see how this credit works.
How it works (CNN.com Aug. 19, 2008)
The credit is good for homes closed on after April 9, 2008 and before July 1, 2009, and can be taken on taxes filed during 2008 or 2009. Even buyers, who bought a home before the bill passed, but after April 9, can claim the credit.
Unlike tax deductions, which only offset taxes by lowering taxable income, the tax credit is a straight dollar-for-dollar deduction of your tax bill. So a buyer who would ordinarily pay $8,000 in taxes would pay just $500.
It's also "refundable," which means if a buyer's taxes are less than $7,500, the government will send them a check for the difference. For example, if a couple's income generates a tax bill of $5,000, the government will refund all of that plus $2,500.
Buyers must start paying back the loan within two years, at a rate of no more than $500 a year for 15 years. When the home is sold, any outstanding balance will be repaid from the profit; if it's sold at a loss and the difference will be forgiven.
Eligible Property | Any single‐family residence (including condos, co‐ops) that will be used as a principal residence. |
Refundable | Yes. Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year. |
Income Limit | Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000, respectively). |
First‐time Homebuyer Only | Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase. |
Recapture | Yes. Portion (6.67 % of credit) to be repaid each year for 15 years. If home sold before 15 years, then remainder of credit recaptured on sale. |
Impact on District of Columbia Homebuyer Credit | DC credit not available if purchaser uses this credit. |
Want your money faster?
Many people see the tax credit as something that will only benefit them after they file their income taxes, however individuals who are planning on purchasing or have already purchased can start seeing savings today by adjusting your current payroll tax withholdings or estimated tax payments right now to account for your anticipated lower tax bill. In addition, if you buy a house in 2009 after filing the 2008 tax return, you can always file an amendment to the 2008 tax return and claim the credit earlier.
How could you not like an interest free loan?
Read the Summary of the “Housing and Economic Recovery Act of 2008"
Clearpoint Mortgage Inc.
Larry Jacobson, President
Phone: 480-636-7068
Mobile: 480-330-0657
E-Mail: Larry@ClearpointMortgage.net
Web: www.clearpointmortgage.net