You read that right! With the passing of the housing bill as a first time home buyer you may be eligible for a dollar for dollar tax credit up to $7,500 on your upcoming tax return. Even if you haven’t owned in the last three years you may be eligible.
What it means is, say you file your taxes but between 4/9/2008 and 7/1/2009 have bought your first home. As you are filing taxes you can apply to receive the tax credit. It would go something like this. You are single and make under $75K or married and filing jointly make under $150K as your modified adjusted gross income. The house was greater then $75,000 in price and you are living in the house (not a rental).
If you were going to receive $300 in return from the federal return, you would actually receive $7,800 instead. Now there are a few things to note about this.
1) It is a 15 year interest free loan (not free money)
2) 2 years after getting the credit you have to start making equal installment repayments to cover a 15 year period ($7500 / 15 = $500 per year).
3) If you already have filed your 2008 taxes, you can do an amendment say if you bought in May 2009. That way you can get the amended return in and get the credit in the same time frame you bought.
4) If you sell your house, or even move out of it during this repayment period, you will have to potentially repay it immediately.
Now I am not a C.P.A at all but did get this information from this I.R.S directly. At this current time they haven’t even written the I.R.S code to correspond to this part of the housing bill.
What do I think of it?
Well, if I were a first time buyer and was going to have to drain my savings to make a down payment. This would be a nice way to get that back, knowing a slush fund in the bank for emergencies is a huge sense of relief. If I were looking at it from an investment standpoint. I could take the $7,500 dollars and invest over 15 years and even at minimal returns have made money off the I.R.S’ money, for once we win! If I bought a foreclosure from a bank that needed some TLC, as many are right now. I would be able to put that money back into my house and increase the value through capital improvements ($7,500 goes along way in a kitchen or bathrooms where you get the most bang for your buck on home improvements).
Of course if you have further questions or want to buy now and learn more about the tax credit shoot me an email or call~
Branch Manage r~ Summit Denver
303.779.0591 x 101 [email protected]