Tax credit: window of opportunity for some 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.