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Government pays lip service to real estate market recovery with first-time home buyer tax credit
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One of the government’s attempts to stimulate the real estate market is the much-talked about and widely misunderstood first time homebuyer credit. The government is promoting it as a major incentive to boost home sales. At a glance, the program looks promising—an $8000 tax credit for first time homebuyers—but on closer inspection the tax credit is much harder to qualify for than many realize.
Here are six things you should know about the first time homebuyer credit.
1. The $8000 for first time homebuyers is a tax credit. A tax credit is the recognition of a partial payment already made towards taxes due. The IRS views this as a no interest loan. The amount, $8000, is supposed to represent 10% of the purchase price of a new home.
2. A first time homebuyer is defined as someone who has not owned a principal residence in the last three years. Married couples where one spouse has owned a principal residence within the last three years do not qualify.
3. Only those who purchase a home between January 1 2009 and December 31 2009 qualify for the tax credit.
4. The tax credit is subject to income limitations. Single buyers need to make less than $75,000 per year and married borrowers less than $150,000 per year. A reduced credit may be available to those who make more than the income requirements.
5. The tax credit is refundable meaning that qualified buyers can take advantage of the credit even if they have reduced tax liability—meaning you can receive and income tax return on the amount if you don’t owe taxes.
6. Buyers must own their home for three or more years or they will have to return the tax credit.
While the tax credit may help a few first time homebuyers—those that qualify—the majority of first time homebuyers in areas that have a higher cost of living see little or no benefit from the program.
The IRS has detailed information available on its web site. http://www.irs.gov/newsroom/article/0,,id=206291,00.html
Want to know what points are? Want to know about 1031 exchanges? Want to know if you have to pay a real estate agents commission when you buy or sell? Want to know how mortgage brokers can offer a “no points no fee loan”? Want to know why you need title insurance? I love answering your questions about loans, real estate, and any other question you may have about the industry.
Shoot me an email with your questions and I will do my best to answer them in my column. Please send questions to america@vgrouprm.com. I’ll do my best to answer.
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