2008 Housing Stimulus Legislation - First Time Buyer Tax Credit
Posted: Tuesday, August 05, 2008
by Karen List
CENTURY 21 Alpha
Who is Eligible
*The $7,500 tax credit is available for first-time home buyers only.
*The law defines a first-time home buyer as a buyer who has not owned a home during the past three years.
*All U.S. citizens who file taxes are eligible to participate in the program.
Who is not Eligible
*Non-resident aliens
Types of Homes that Qualify for the Tax Credit
*All homes, whether single-family, townhomes or condominiums will qualify.
* However, there are several conditions:
(a) The home must be used as a principal residence, and
(b) The buyer has not owned a home in the prior three years.
*The Tax Credit includes newly-constructed homes.
Income Limits
*Home buyers who file as single or head-of-household taxpayers can claim the full $7,500 credit if their adjusted gross income (AGI) is less than $75,000.
*For married couples filing a joint return, the income limit doubles to $150,000.
*Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit.
*Married couples filing jointly who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.
*The credit is not available for single taxpayers whose AGI is greater than $95,000 and married couples filing jointly with an AGI that exceeds $170,000.
Effective Dates for the Tax Credit
First-time home buyers would receive a $7,500 tax credit for the purchase of any home on or after April 9, 2008 and before July 1, 2009. To qualify, you must actually close on the sale of the home during this period.
Tax Credit is Refundable
*A refundable credit means that if you pay less than $7,500 in federal income taxes, then the government will write you a check for the difference.
(a) For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $2,500 payment from the government.
(b) If you are due to receive a $1,000 tax refund from the government, your refund would grow to $8,500 ($1,000 plus $7,500 from the home buyer tax credit).
*If you purchased the home in 2008, the tax credit is taken on your 2008 tax return. *If you buy in 2009, you have the option of taking the credit on your 2008 or 2009 tax returns.
Payback Provisions
*The tax credit is an interest-free loan that must be repaid over 15 years.
*The minimum repayment amount must be 15 equal annual installments. For example, if the credit amount is $7,500, then the home buyer must repay a minimum of $500 each year for 15 years.
ALSO: On July 30, 2008, President Bush signed into law a new housing reform bill designed to help stimulate the recovery of the housing industry.NOW is the time to take advantage of existing home buying assistance programs before they expire later this year.
Two important changes are:
1.All government - sponsored zero down payment assistance programs are eliminated as of October 1, 2008.To be eligible for these programs, all home loans would need to be approved by September 30, 2008.
2.The minimum down payment for Federal Housing Administration (FHA) loans, the largest purchaser of mortgages in the United States, would increase from 3 percent to 3.5 percent after )ctober1, 2008.
Make sure to take advantage of this program before it disappears. Also, note that the government sponsored zero down payment assistance is only available until October 1, 2008, so you better hurry on that program if you wish to utilize it.
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Top-level comments on this article: (1 total)Ok what good is a credit for those making under $25,000 a year who want to buy a low ebd home? Can you explain? Thanks!Hi Robert,Well, I work in the Bay Area in California, so unfortunately $25k per year wouldn't be enough to buy a home, so I guess it depends where you live and what is affordable in that area. I'm not sure what area that income would buy a home, but I am sure there are some areas with low cost housing. I know the tax credit isn't for everyone and surely won't benefit every first time home buyers, but it I thought it was great information for those people who didn't know about it and who it will help.Thanks for your question. Good to see people reading the artcles :)Yes an excellent article very clear. However, why I asked was because this program does nothing for the "non credit worthy" that they like to label people as like those in states like here in Florida where the average income for two is about $40,000 and a single person many times, $25,000 if that. Yes they are no longer able to buy even low income housing even though housing here is in the pits with many homes well under $100,000 in value. What is the signifcance? Frankly what most people don't understand is that the so called "American Dream" is for those who have only. A very significant change and shift in American culture as dictated by those in corporate power and not by the vote and who we tax payers must bail out. Good article keep writing to the topics.I agree.
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