To stimulate the housing market, legislation was recently passed to provide tax credits for up to $7,500 for first-time home buyers.
First-Time Home Buyer Tax Credit FactsWho is Eligible?The $7,500 tax credit is available to all first-time home buyers who are tax filing U.S. Citizens. The law defines a first-time home buyer as a buyer who has not owned a home during the past three years.
Income LimitsHome buyers who file as a single or head-of-household taxpayer can claim the full $7,500 credit if their adjusted gross income (AGI) is less then $75,000. If their income is between 75,000 and 95,000 they are eligible to receive a partial tax credit. If the household earns greater then $95,000, they are not eligible to receive the tax credit.
Married couples filing joint returns earning up to $150,000 can receive the full tax credit. Households earning between $150,000 and $170,000 are eligible to receive partial tax credit. If the household is greater then $170,000, they are not eligible to receive the tax credit.
Effective Dates for the Tax CreditFirst-time home buyers who purchased a home on or after April 9, 2008 and before July 1, 2009. To qualify, you must actually close on the sale of the home during this period.
Tax Credit is RefundableA refundable credit means that if you pay less then $7,500 in federal income taxes, then the government will write you a check for the difference. For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $2,500 payment from the government. If you are due to receive a tax refund from the IRS, your refund would increase by $7,500. If you purchased your home in 2008 you would take your tax credit in 2008. If you buy in 2009, you have the option to claim the credit on your 2008 or 2009 tax return.
Types of Homes that Qualify for the Tax CreditAll homes, weather a single-family or condominium will qualify, provided, that the home will be used as a primary residence and the buyer has not owned a home in the prior three years. This also includes newly-constructed homes.
Payback ProvisionsUnlike most tax credits, this tax incentive MUST be paid back. All eligible purchasers who claim the credit will be required to repay it over 15 years. The status specifies that the repayment amount will be 6.67% of the credit amount each year. Thus, a buyer who qualifies for the full $7,500 credit will repay $502.50 each year. There will be no interest charge on outstanding balances.
Source: John Adams Mortgage Company, an affiliated company of Max Broock Realtors and Real Estate One
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