Buying a house is always a big decision. Especially if you've never owned one before, and especially when the housing market is unstable. Anyone who's been trying to wait out the storm should check out the new home purchase tax credit created by the massive housing bill Congress just approved--for some buyers, it may make the decision seem a whole lot easier.
According to Kenneth Harney in a recent San Francisco Chronicle article called How Home Purchase Federal Tax Works, first-time buyers and buyers who haven't owned a house within three years may be eligible for up to a $7500 credit against their federal taxes for 2008 or 2009. They are only eligible for the credit if they go into closing on their home before the end of June, 2009.
High expectations surround this new home purchase tax credit. In theory, it seems like it could work wonders. Congress has set no limit on the number of people who can qualify, and the credit should work to kick housing sales back up while finally clearing out unsold real estate inventories across the country. There are no regulations on the kind of house. It can be any price, in any location, old, new, with five bathrooms or one and a half. As long as the buyers fit the profile and it's in closing before June, 30, viola! Your tax bill will be up to $7500 lighter.
If you owe the IRS any money from income taxes, the credit could wipe out what you owe and grant you a hefty refund. Harney writes, "The new home purchase tax credit is what the government calls refundable: If your tax bill is less than the credit amount, you get the difference back from the Treasury."
Current home owners are not eligible for the credit. It applies only to first time buyers, or people who sold their homes more than three years ago and now rent. High earning buyers (with adjusted gross incomes over $150,000) will see their credit maximum scaled down in increments.
There is a payback, however. Beneficiaries of the tax credit are required to pay the credit back over a number of years, even as many as 15. If you sell the house before your repayment period is up, you won't have to pay the credit from the proceeds. Harney writes, "In other words, the federal government is taking on all or much of the risk that the value of your new house won't increase over time."
Think of it as a loan, albeit an interest free one. And you can only take out $7500.
No comments:
Post a Comment