As I was discussing in the last blog entry, the house stimulus has been debated and I wasn't quite sure what the credit would be for buyer and how it would be applied or paid back. Today, one day after the Stimulus Package was signed in Denver, here are the numbers that were posted on the National Associations of Home Builders website. Although I have not been able to find a definitive number, I have read that the overall total of foreclosures is still relatively low. Unlike the divorce rate, the foreclosure rate is still in the single digits from the last article I read. I am looking for a site that has national statistics, but have yet to find a good source. If any of the 10's of my readers have a reliable source, let me know.
THE NEW BILL: eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase.
The credit is designed to encourage first time home buyers to go ahead and make the leap to purchase their first homes. Combine this tax credit with the fact that home prices and interest rates are at historical lows, and it is indeed an ideal time for many first-time home buyers to purchase a home!
Here are some things to keep in mind:
A first time home buyer is defined as someone who has not owned a home in the last three years. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. You cannot purchase the home from a related party like a spouse, direct ancestor, or direct lineal descendant (child or grandchild); however, you can still qualify for the credit if you purchase a property from siblings, nephews, nieces, and others. If you are married, both spouses must be first-time home buyers. If more than one unmarried individual is buying the property, the credit can be split up among all the individuals who qualify. However, the total credit taken cannot exceed $7,500 for homes purchased in 2008 and $8,000 for homes purchased in 2009.
For Homes Purchased Between April 9, 2008 and December 31, 2008 the credit amounts to 10% of the purchase price of the home not to exceed $7,500 the tax credit works like an interest free loan and must be repaid over a 15 year period.
For Homes Purchased Between January 1, 2009 and December 1, 2009 the credit amounts to 10% of the purchase price of the home not to exceed $8,000 the tax credit does not need to be paid back if you continue living in the home as your primary residence for three years without selling it.
How does a tax credit work?
A tax credit is a special provision that reduces income tax liability on a dollar for dollar basis. When filing a tax return, you must include income items, deduction items and the number of exemptions, among other things, to figure your total tax liability. For example, if you’re total tax liability for the year is $8,000, and you qualify for the full $8,000 tax credit, this credit would wipe out all of the tax due. If your employer already deducted the $8,000 from your pay checks throughout the year, you would receive a tax refund of $8,000. If you owe less than $8,000 in taxes for the year, you are still eligible for the full $8,000 credit when you file your tax returns. In that case, the IRS will write you a check for the difference between $8,000 and your actual tax bill. These checks are expected to arrive in the same normal time as your tax return (or direct deposit for those who e-file) since they are a credit related to the return…they are not separate stimulus checks.
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