Tax credit: window of opportunity for some buyers

October 25th, 2008 by Marian Bennett
Categories: Finance, Relocation & Buyers

“The First-time Home Buyer Tax Credit was passed this year as part of the Housing and Economic Recovery Act (H.R. 3221) on July 30 and targets any individual or household that hasn’t owned a home for at least three years.

Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9. It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if prospective buyers wait to purchase their home in the first half of 2009 they can take the credit on their 2009 tax return. The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so new homeowners can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500. Income limits are $75,000 for individuals and $150,000 for households. Individuals whose income exceeds the $75,000 limit but isn’t more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000.” — Provided by Susan O’Driscoll, Princeton Capital.

This IRS page dedicated to explaining the new tax credit states that this in essence an interest-free 15 year loan.

This N.A.R. informational handout (pdf) also states that if your income is over the limit, there is a phase-out formula. In other words, not all of the credit is lost.

Real estate intersects with law, tax, finance, construction, and other specialties. Find the appropriate specialist and create a team to work with and communicate together on your behalf. It’s a win-win for all involved – especially you. Please consult with your tax specialist on this issue to determine how H.R. 3221 will specifically apply to you – particularly if it may be in your best interest to modify your tax withholding sooner rather than later.

This entry was posted on Saturday, October 25th, 2008 at 1:47 pm and is filed under Finance, Relocation & Buyers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Credit Crunch » Tax credit: window of opportunity for some buyers said at October 25th, 2008 at 2:28 pm
[...] Get Elf Blog wrote an interesting post today onHere’s a quick excerpt “The First-time Home Buyer Tax Credit was passed this year as part of the Housing and Economic Recovery Act (H.R. 3221) on July 30 and targets any individual or household that hasn’t owned a home for at least three years. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9. It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if prospective buyers wait to purchase their home in t [...]
» Tax credit: window of opportunity for some buyers said at October 25th, 2008 at 2:37 pm
[...] Get Elf Blog wrote an interesting post today onHere’s a quick excerpt “The First-time Home Buyer Tax Credit was passed this year as part of the Housing and Economic Recovery Act (H.R. 3221) on July 30 and targets any individual or household that hasn’t owned a home for at least three years. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9. It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if prospective buyers wait to purchase their home in t [...]
Real Estate Secret Info » Blog Archive » Tax credit: window of opportunity for some buyers said at October 27th, 2008 at 4:12 pm
[...] Marian Bennett, Coldwell Banker wrote an interesting post today onTax credit: window of opportunity for some buyersHere’s a quick excerptReal estate intersects with law, tax, finance, construction, and other specialties. Find the appropriate specialist and create a team to work with and communicate together on your behalf. It’sa win-win for all involved – especially you. … [...]
Finest Real Estate Info » Blog Archive » Tax credit: window of opportunity for some buyers said at October 28th, 2008 at 12:14 am
[...] Marian Bennett, Coldwell Banker wrote an interesting post today onTax credit: window of opportunity for some buyersHere’s a quick excerptReal estate intersects with law, tax, finance, construction, and other specialties. Find the appropriate specialist and create a team to work with and communicate together on your behalf. It’sa win-win for all involved – especially you. … [...]
News said at October 28th, 2008 at 9:41 am
Let’s make some assumptions.

5 — Historic home price to personal income ratio for California (since 1970’s but excluding last boom where it got up to as high as 10; prior to 1970’s it was the same as the rest of the nation, around 3).

That means to buy a 750K home you need 150K in income which more or a less makes this tax credit worthless. To buy a 1,000K home you need 200K in income. Good luck getting a loan with 200K income for 1,000K house in this environment.

My point is this tax deduction is meaningless for coastside. It certainly makes a difference in places like Sacramento.

In other news, it seems like the coastside market came to a halt in the last two weeks. Is everyone waiting to see how far below the asking, all the pendings will close? Presidential election? Dow over 10K? Please post your comments.
construction finance home loan | Bookmarks URL said at October 28th, 2008 at 7:09 pm
[...] … to be done on a case-to-case-by-case basis with government help. That is what, in the 1930s, Roosevelt established a Home Owners’ Loan Corporation to do. And we’re going to need to go back to that model and do something similar. Sheila Bair, the head of the FDIC- BILL MOYERS: Federal Deposit Insurance … Tax credit: window of opportunity for some buyers [...]
Marian Bennett said at October 29th, 2008 at 5:07 pm
News,
Thanks for adding intelligence to the discussion. However, I have to disagree with your comment that the “tax deduction is meaningless for Coastside”. There are buyers and sellers who could benefit from this, if not directly, than indirectly. Example: If this helps a Sacramento buyer get into a home, the seller of that home is then able to move on, which creates another sale, and so on. Or what if mom & dad, who live here on the Coast, read this post and it gets them to discuss options with a young adult child who has been renting… you never know who is reading and who will benefit. I’m trying to contribute to the “transparent” movement.

I will address your questions in a separate post.

I, too, would like more people to comment here.
Arn Cenedella said at October 29th, 2008 at 7:57 pm
Both of the viewpoints expressed by Marian and News have validity. It is kind of like “is the glass half full or half empty?”. The maximum loan amounts and income required as noted by News are basically correct. So a couple could buy a house for $750K with an income of $150K and qualify for the credit. Marian would know better but I would assume there are a fair number of homes that could be purchased on the Coastside for that amount. So this tax credit can help entry level buyers in our area. For single folks, it will help them buy a condominium. So it will help some buyers in our area but it won’t help the majortiy of them. In my opinion, it will not have a major impact on our market!

It should be noted this tax credit is more like a no interest loan as the credit does need to be paid back. Like most things our self-serving Washington DC politicians do, this tax credit is more about trying to make themselves look good as they try to help the “little people” than actually having a major impact on people’s ability to buy homes.