The government is offering an $8,000 tax CREDIT for most new home buyers. There are a few hoops to jump through to qualify for it, but the rules aren’t terribly unrealistic.
First, you have to buy a home (residential property) and move into it between Jan. 1, 2009, and Dec. 1, 2009. You also have to be considered a “first-time buyer”; which they are defining as a person who has not owned their home for the last 3 years. If you meet those standards then there is some fine print you should know about.
The credit is actually for 10% of the home’s value, up to $8,000. So if you buy something less than $80,000 you don’t get the maximum allowed credit.
You owe $8,000 less
This is a tax CREDIT. It is like the IRS is pretending that you paid them $8,000 already – unlike deductions (such as mortgage interest) that are subtracted from gross income before tax is calculated. If qualified for $8,000, you get $8,000, even if you didn’t owe that much in taxes!
You can claim this tax credit on your 2008 taxes. Yup, you heard right: 2008. “A buyer could close on a home the same day that President Obama signs it into law, fill out their income tax forms the next day, and receive the tax credit fairly quickly.” (Florida Association of REALTORs)
Last year’s $7,500 credit was more like a 0% loan because there is a repayment schedule on the entire amount. This credit doesn’t have to be paid back unless you sell the property in 36 months or sooner. Otherwise you just keep the money.
This is a great incentive to get people off the fence and into the real estate market, especially with tax season upon us! With amazingly affordable homes out there and interest rates at historical lows this is an exciting incentive and will help people get into homes.
Here is the rest of the fine print:
- There is an income limit to qualify. A married couples’ modified adjusted gross income (MAGI) should be under $150,000 and single filers’ MAGI should be less than $75,000.
- Partial tax credits may be available for married couples with MAGI incomes over $150,000 but under $170,000, and single filers with incomes over $75,000 but under $95,000.
- If married couples file separately, they can both claim 5 percent of the home purchase ($4,000 each for a home over $80,000) on their tax returns.
- If purchasing a new home, the effective date to receive the credit is the first day the homeowner actually lives in the house. If construction began in 2008, that buyer could still qualify. And if construction begins in 2009 but the owner does not take possession until 2010, the buyer would not qualify.
Helpful Links:
First-Time Homebuyer Credit Questions and Answers: Homes Purchased in 2009 (IRS website)
Scenarios for unmarried couples (IRS Website)