Housing and Economic Recovery Act 2008
August 31st, 2008 categories: Buyer's Advice, Real Estate New, Seller's Advice
Federal Tax Credit and what it means?
The amount is 10% of the purchase price of the home up to a maximum of $7500. It will be a credit on your personal income tax return in a calendar year following the year of closing on your property. The year after that you will be required to pay it back in equal installments over the next 15 years. Also, if you sell your home during 15 year payback period it will be recaptured when it is sold. If the home is sold at a loss the debt is completely forgiven.
So, if a home costs $67,000 the credit to you will be $6700.
If the home costs $125,000 the credit to you will be $7500.
Who is eligible?
The tax credit is for First Time Home Buyers only. But, the interesting thing is that you cannot have owned a home in the last three years but who may have done so previously.
- If your 1040 filing status is single or head of the household you are eligible for the Tax benefits if your income is no more than $75,000. First
time home buyers who file a joint return cannot have more than $150,000 in income. - Incomes between $75,001 – $94,999 (single) or $150,001 – $169,999 joint returns are eligible for only partial Tax Credit. (Which is so much better than nothing)?
- Incomes that are greater than $95,000 (single) or $170,000 (joint return) are not eligible.
- To claim the Federal Tax Credit on your single or joint tax Returns for the purchase of a Single Family Home – between April 9th, 2008 through July 1, 2009. You should also contact your Tax Advisor.
- You are required to pay back the Tax Credit without any interest in equal installments of 6.67% of the total credit each year for the 15yrs beginning the year after the Tax Credit has been claimed.
Examples:
If your Tax Liability was $5000 after The Tax Credit was added you would receive a total of $2500. The refund amount is the $7500 – $5000.
If your Tax refund was $2000 after The Tax Credit was added you would receive a total of $9500.
If you claim your Tax credit of $7500 in 2009 on your Federal Income Tax Return for a closing that occurred in 2008, obviously the Credit will be received in 2009 so repayments will begin in 2010 with a payment amount of approx $500 a year.
Information reliable but not guaranteed
