Congress recently passed a provision in the Housing Bill that is a significant incentive for first time home buyers. It provides a tax credit of 10% of the purchase price up to a maximum of $7,500 and retroactive back to April 9, 2008 and continues through June 30, 2009.
This is a credit not a deduction, which means it directly reduces the taxes owed – dollar for dollar. A tax credit is much more valuable than a deduction. A credit reduces dollar for dollar the amount of tax you owe. A deduction merely reduces the amount of your income that is taxable.
The incentive is available to individuals who make less than $75,000 and to couples who make less than $150,000. Above these levels the incentive is reduced and is completely phased out at $95,000 for an individual and $170,000 for a couple.
A first time home buyer is defined as not having an ownership interest in a principal residence in the previous 3 years.
The tax credit must be repaid over the next 15 years, and more quickly if the home is sold or is no longer the primary residence. Repayment is made by increasing the tax owed in the year the home status is changed (sold or no longer the primary residence). For more details on the tax credit and repayment provisions, please see a tax accountant.
The actual legislation that implements this tax incentive is called the Housing Assistance Tax Act of 2008 HR 5720. It is included as part of the massive Housing Bill HR3221.
10 Responses to the article “First Time Home Buyer Tax Credit”
The fact that the tax credit need to be repaid so quickly if you plan on moving again is really a killbuzz.
It will be interesting to see if the tax credit is extended once again. With the government’s mortgage-backed security purchase program ending March 31st, and the tax credit ending shortly thereafter, 2010 could get ugly.
Great post. I really appreciate the information. You have done a wonderful job communicating your message. Keep up the good writing.
Hrmm that’s strange, my comment got eaten. Anywho I wanted to say that it’s great to learn that somebody else also touched on this as I’d trouble locating the same information in other places. This became the very first place which helped me understand this. Appreciate it.
Home tax credits can sure make a big difference.
Tax credit is exactly not an deduction but still its an useful act in case of real estate.
Have you ever considered having a guest author? It is a great way to get some free, good quality content for your site. I would be happy to post and can give you some references.
Great post. If only we could see the return of the tax credit
Now we are in 2011 can you update the current tax credits
Hi Charles,
Would love to have you as a guest author. No references needed. I have known you for years!
~Mack
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