Don't be frightened by the title - this is really good news for the first time homebuyer that has been converted to "user-friendly" language! So, why should you be interested in this information? Read on . . .
If you have purchased, or plan to purchase, a home between April 9, 2008 and July 1, 2009, and have not owned a principal residence for a period of three years prior to this purchase, you are considered to be a first time homebuyer and may be eligible for up to a $7,500 tax credit. This means now is the time to buy!
This sounds too good to be true, right? Well, let's take a look at the requirements:
• Your home must be purchased in the timeframe noted above - 4/9/08 to 7/1/09
• There are income requirements (modified adjusted gross income level of $95,000 for singles or $170,000 for marrieds)
• If you are over these income levels, you may still qualify for partial tax credits
Now, don't worry that you will have to go through a ton of paperwork and meet with a financial guru to set things in motion. You simply claim the tax credit on your federal income tax return. According to the NAHB, "Buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the future home buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment. Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding."
Still think there must be some kind of catch? This is really very straightforward, but you need to realize that we're talking about a tax credit here. That means you will eventually repay the government, interest-free, over the next 15 years from the date of your purchase (closing date), or when you sell your home (if there are sufficient capital gains from the sale.)
The NAHB explains it this way - "A home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven."
All things considered, this is a great deal for the first time homebuyer and something that should stimulate the economy.
By:Matt Kombrink
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