Homebuyer Tax Credit- up to a $7,500 tax credit that would be available for any qualified purchase made between April 8, 2008 and June 30, 2009. The credit is repayable over 15 years (making it in effect, an interest free loan).
HOW DOES IT WORK?
First, we have up to a $7,500 credit for new homeowners (Folks who haven't owned a principal residence for three years before buying the new home.) Those who qualify to receive this credit will receive 10% of the purchase price of their home in the first year. Then they will repay the loan over a 15 year period, starting the second year after the taxable year in which the house is purchased.
Example: Purchase the home in 2008. Taxable year would be 2009. Repayment of the loan would begin in 2010. You will be paying 6.667% of the original credit back to IRS each year for 15 years. Thus, a buyer who qualified for the full $7,500 credit will repay $502.50 each year.
This is a "refundable" credit. That means, even if your tax liability is zero, you can file to get this money directly from IRS. Although this is a loan, it's a zero-percent loan.
Tax credits are special provisions that reduce income tax liability on a dollar for dollar basis. (Credits claimed on an individual's income tax return.) In this case, Congress has created a tax credit for first-time homebuyers. This new tax credit is a "refundable" credit. Example: if your actual tax liability was $6,000 (the actual amount that you owed on your tax return), and your allowable credit was $7,500, you would receive a refund check from IRS for the difference of $1,500.
If you sell the house in less than 15 years, you will have to repay the rest of the credit immediately. This requirement is waived if the owner dies. There are special provisions when the house is sold due to divorces or other emergencies.
This is a tempory credit and may not be renewed once it expires on June 30, 2009. The credit phases out for married folks, filing jointly, with modified adjusted gross income of between $150,000-$170,000. For singles, the phase-out is between $75,000-$95,000 (modified adjusted gross income).
If you have obtained financing through a tax-exempt bond related financing program offered by a state housing agency then the purchaser is NOT eligible for the tax credit.
A real estate agent cannot give you tax advise and this article has been provided for informational purposes only. Contact your professional tax advisor to see if you qualify for this "credit" and if it will be a benefit to you. This information is accurate based on information available as of July 30, 2008.
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