An Online Home Buying Network For Educators
First-Time Homebuyer Tax Credit
When I consult with a new client looking to buy a home, one of the first questions I ask is do they own a home right now? If not when is the last time they owned a home? If they say it was more than three years ago, then they qualify as a first-time homebuyer which allows them to get up to a $7,500 tax credit. The amount they actually get depends on income levels.
A single taxpayer making up to $75,000 gets the full $7,500 tax credit as do joint filers making up to $150,000. For those making more, the tax credit is reduced and finally eliminated at $95,000 for a single taxpayer and at $170,000 for joint filers. Since this is a tax credit it reduces the tax owed, and if you do not owe $7,500 then you would get a check back for the difference. For example, if you owe only $500 on your taxes, then the IRS would send you a check for $7,000.
You can get the tax credit if you purchased a home between April 9, 2008 through July 1, 2009. Claiming the tax credit is simple as all you have to do is claim the credit on your next years federal tax return.
Is there a catch? Yes, as the tax credit works as an interest free loan and must be paid back over 15 years, or when you sell the house. If you receive the full $7,500 tax credit you would owe $500 per year for fifteen years, however you do not have to start paying this back until two years after you take the tax credit. If you sell the home and there is not enough profit to pay the balance of the $7,500 tax credit, then the remaining credit payback if forgiven.
This may be a great time for first-time homebuyers to buy a home and reduce the amount of tax they owe, or even get a refund on next years tax. Interest rates are low, prices are great and there is a great choice of homes. If you purchase a home by the end of 2008, then you can take the tax credit on your taxes in January and reduce the taxes you owe, or even get some cash back to help with your first years bills.
It is always best to consult with your tax person to verify that the first-time hombuyer tax credit pertains to you and to see what kind of benefit you will derive from it.
A single taxpayer making up to $75,000 gets the full $7,500 tax credit as do joint filers making up to $150,000. For those making more, the tax credit is reduced and finally eliminated at $95,000 for a single taxpayer and at $170,000 for joint filers. Since this is a tax credit it reduces the tax owed, and if you do not owe $7,500 then you would get a check back for the difference. For example, if you owe only $500 on your taxes, then the IRS would send you a check for $7,000.
You can get the tax credit if you purchased a home between April 9, 2008 through July 1, 2009. Claiming the tax credit is simple as all you have to do is claim the credit on your next years federal tax return.
Is there a catch? Yes, as the tax credit works as an interest free loan and must be paid back over 15 years, or when you sell the house. If you receive the full $7,500 tax credit you would owe $500 per year for fifteen years, however you do not have to start paying this back until two years after you take the tax credit. If you sell the home and there is not enough profit to pay the balance of the $7,500 tax credit, then the remaining credit payback if forgiven.
This may be a great time for first-time homebuyers to buy a home and reduce the amount of tax they owe, or even get a refund on next years tax. Interest rates are low, prices are great and there is a great choice of homes. If you purchase a home by the end of 2008, then you can take the tax credit on your taxes in January and reduce the taxes you owe, or even get some cash back to help with your first years bills.
It is always best to consult with your tax person to verify that the first-time hombuyer tax credit pertains to you and to see what kind of benefit you will derive from it.
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