Here are 6 things you should know about the First Time Buyer Tax Credit.
1. Buyers have until July 2009 to make a purchase that qualifies. The tax credit was passed in July of this year as part of the Housing and Economic Recovery Act (H.R. 3221). It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if you buy in the first half of 2009 you will be able to take the credit on your 2009 tax return. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9th.
2. Buyers don't really have to be "first-timers."The tax credit is actually available to any individual or household that hasn’t owned a home for at least three years.
3. Even if buyers exceed the income limit, they can benefit from the credit. The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so you can get 10 percent of the home price credited against your tax liability, up to a maximum $7,500. Sounds like a great deal. But what if you make more money than the income limit of $75,000 for individuals and $150,000 for households? Good news: Individuals whose income exceeds the $75,000 limit but don't make more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000. By the way, any house is eligible as long as it’s a primary residence and is in the United States.
4. Think of it as an interest-free loan. The federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years, although repayment will be no more than $500 yearly and payments will not start until 2011. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. The National Association of Realtors is pushing congress to remove the repayment provision, making this tax credit a true tax credit rather than an interest-free loan.
5. You don't have to be authorized before making a home purchase. There is no pre-purchase authorization, application, or other approval process. Eligible buyers simply have to claim the credit on your IRS Form 1040 tax return and/or any form that the IRS might devise.
6. New-home construction qualifies. For a home that a buyer constructs, the purchase date is the first date the buyer occupies the home. However, any home that is not a primary residence, such as a vacation home or income property, does not qualify.
Labels: first time home buyer, hr 3221, tax credit, The Housing and Economic Recovery Act of 2008
