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Recently Congress approved landmark legislation by way of the Housing and Economic Recovery Act of 2008. The focus of this legislation is a tax credit of up to $7,500.00 for first time home buyers. A first time home buyer is explained by the law as a home buyer that has not owned a principle residence during the three year period prior to purchase. Married couples must both meet the first time home buyer terms and conditions to be qualified for the tax credit.

The tax credit is available on homes settled after April 9, 2008 and before July 1, 2009. Any single family detached home, townhouse, or condominium home will eligible so long as it will be used as the main residence of the buyer. In order to qualify such criteria, first time homebuyers need to have a Modified Adjusted Gross Income of $75,000.00 or less for individuals, or $150,000.00 or less for married taxpayers. Those exceeding these limits may be eligible for a lesser tax credit.

The tax credit is refundable which reveals that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. For buying homes in the 2009 calendar year, homebuyers will have an option as to whether to apply the credit to their 2008 or 2009 tax returns. Your tax consultant should be consulted to assist you decide which year would be more beneficial.

Homebuyers should ensure that the tax credit must be repaid to the government over the course of 15 years, or when they sell the home if there are adequate capital gains from the sale.

Even though the tax credit must be repaid, it is still of major advantage to first-time homebuyers. This infusion of cash to the homebuyer during the year of buying will raise the affordability by diminishing potential mortgage amounts.

If you have not owned a home in the past three years, this tax credit offers great assistance to enhance your affordability. Now it’s a wonderful time to purchase as interest rates are still low and there are plenty of lists to select the best. Take guidance from your local real estate professional and your tax consultant to see how this tax credit can work for you.

Tags: federal housing tax credit, income tax liability, tax consultants, tax credit, taxes



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