FIRST TIME HOME BUYER TAX CREDIT

The Housing and Economic Recovery Act of 2008 authorizes a $7500 tax credit for qualified first time home buyers purchasing homes between 4/9/08 and 6/30/09.

To qualify for the credit you must be a first-time home buyer (have not owned a principal residence during the 3 year period prior to your purchase) and must purchase between 4/9/08 and 6/30/09.

You claim the tax credit on your federal income tax return - no other paperwork is required!

In general, the tax credit is 10% of the qualified home purchase price, but the amount of the credit is capped at $7500.

There is also an income limit. If you exceed the income limit, the amount of the credit will be modified. There is a calculation for figuring the modified credit amount. I suggest you consult your tax advisor for information relating to your specific circumstances.

The great news is that this credit is refundable. That means that if you have no tax liability you will receive a check for the full amount of your credit. If you are receiving a refund, your credit will be added to your refund check. And if you owe the IRS, that amount will be deducted from your check.

At this point in time the credit must be repaid. There is some discussion among lawmakers regarding making the credit forgiveable. There is also some discussion about allowing ALL buyers between the designated dates to receive the credit (non first time buyers).

If the repayment plan remains as is currently in place, the credit is paid back over 15 years. That's $500 per year, paid on your tax return. It will either add $500 to what you owe, or reduce your refund by $500.

For more information, contact your tax advisor.

What do you think of this tax credit?

Linda