The Housing and Economic Recovery Act of 2008 provides a $7,500 tax credit for qualified first-time home buyers who purchased homes between April 9, 2008 and July 1, 2009. Do you qualify for the tax credit? Call me to find out for sure!
First-time home buyer– any buyer who has not owned a principal residence within the past 3 years prior to the purchase. For married couples, neither person can have owned a home in the past 3 years. Ownership of a vacation home or a rental property not used as a principal residence does not disqualify you from being a “first-time buyer”.
How do I claim the credit? When you file your federal income taxe return, you will claim the credit. No other forms or applications are necessary.
Income dependant– The credit received depends on your income. Partial credits may be available for people who earn more than the Adjusted Gross Income limits. Credit will be phased out until it reaches the limit where it becomes completely unavailable ($95,000 for single filers, $170,000 for joint returns).
Home purchased is under $75,000– Generally, the credit is equal to 10% of the qualified home’s purchase price, capped at $7,500. Most people will get the whole $7,500 credit, unless they exceed the income limits OR purchase a home under $75,000, in which case they will get 10% of the purchase price.
Credit is refundable– even if you do not have a tax liability, or your liability is less than $7,500 they will send you a check for the credit (a refund).
Repayment– This tax credit DOES need to be repaid to the government. Home buyers who receive the credit will need to repay the credit over 15 years (or when the home is sold, if there is sufficient capital gain) with NO interest. The credit will be repaid at $500 per year, starting 2 years after it is claimed. Basically, this is a zero interest LOAN from the government.
Some people are wondering if they should take this credit at all. That is a question for your tax accountant or financial planner. I think that if you do not need it for any specific reason, then you might not want to take it. However, if you have credit cards or other debts with interest, it might make sense to use this money to pay off those higher-interest debts.