Tax Credits for New Homeowners
By E. E. Kane
Photo: © Guillermo Gonzalez - iStockphoto
(This article has been updated)
 In spite of the turmoil of the past few years in the real estate world and the general economy, the current housing forecast is favorable for homebuyers. While housing prices may continue to drop, it is possible to close on a house at below market value and secure interest
rates at record lows. And if you are a first-time buyer, the government is prepared to give you one more incentive to take the plunge: a tax credit of $8,000.
Qualifications are fairly simple.
- The closing date of the house must fall between January 1, 2009, and December 1, 2009.
- 'First-time buyers' mean those who have not owned a home as their principal
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- residence for three years before closing on the current home. This status must apply to both partners in a marriage, even if one partner has never owned a home.
- Your modified adjusted gross income (MAGI) must not exceed $75,000 for singles and $150,000 for married taxpayers.
- The tax credit does not have to be repaid.
- And you can only claim the full $8,000 if you buy a home for $80,000 or more. Homes worth less than $80,000 will qualify for a tax credit of 10% of the purchase price.
Since this tax credit is refundable (you can receive it as a tax refund after filing your federal tax return), the immediate advantage is what you can do with it: You can pay off credit cards to free up cash flow, improve your credit score, and qualify for a better interest rate. Make a larger down payment or pay for closing costs and other expenses related to buying a house.
Consult a tax professional for the finer details of the tax credit. If you have been on the fence about buying a house, have a steady, secure job, and a good credit score (720 or higher), there is no reason to wait. Start looking so you can close before the December 1, 2009, deadline. |
