A number of people have asked us about the first time home buyers tax credit created under the 2008 Housing Rescue and Foreclosure Act (HR3221). It’s a somewhat-helpful program where first-time (not really first time) home buyers can receive an income-tax credit on their home purchase. However, like much of the housing legislation passed in 2008, there is a catch with this program.
Let’s talk about the use of the term „first-time home buyer.“ This is erroneous since they define such a person as „someone who has not owned a home in the previous three years.“ Don’t you just love government definitions? In addition, the home must be a principal residence and purchased between April 9, 2008 and July 1, 2009.
The credit is equal to 10 percent of the purchase price, up to $7,500. Single taxpayers with modified adjusted gross income (MAGI) up to $75,000 and couples with MAGI up to $150,000 will qualify for full credit. Singles with MAGI up to $95,000 and couples with MAGI up to $170,000 will get a reduced amount. Those with higher incomes don’t qualify.
If the amount of tax a home buyer owes is less than the amount of the credit, they get to keep the difference in the form of an IRS refund. They don’t really get to keep the refund though and that is the „catch“ we spoke of earlier.
The home buyer must begin to repay the credit in two years in increments of about $500 a year over a 15-year period for those who received the full credit. Home Buyers who sell their home before the credit is repaid must pay off the loan with their profits. If they sell the home at a loss, the loan is forgiven.
We hope this clears up some of the confusion and gives you some good water-cooler trivia to share with your work mates.
Immobilienmakler Heidelberg Makler HeidelbergSource by Gene Urban