First Time Home Buyer Tax Credit

So is it true?

Will the government give you a $7500 income tax credit if you buy a home for the first time?

Well it is TRUE! It is called the Housing and Economic Recovery Act of 2008

Ok, but you do know that there are guidelines. But they are simple and well worth the effort. So if you have been hesitant to purchase a home this can definitely give you the boost to get off the fence and start looking for your new home.

So want to know what those guidelines are?

Amount of Credit: 10% of cost of home, not to exceed $7500

So that means if you purchase a home that is $65,000 you will receive a credit of $6500 on your income tax return. If you purchase a home for $150,000 you will receive a credit for $7500.

Your property has to fit into this category: Any single-family residence (including condos, co-ops) that will be used as a principal residence. So that means a detached home, townhouse, duplex or condo that you will live in.

This reduces the income tax liability for the tax year of purchase. Claimed on tax return for that tax year.

So what is the income limit? Full amount of credit available to individuals with adjusted gross income of no more that $75,000 ($150,000 on a joint return).

So how to they classify first-time buyer? You or your spouse may not have owned a principal residence in 3 years previous to purchase.

So do you have to pay this back? Yes. Over the next 15 years a portion will be deducted from your tax return. If the home is sold before the 15 years, then the remaining balance will be recaptured on the sale.

If you live in the District of Columbia then you cannot receive the DC credit if you apply for this one.

So you bought a house this year, but it was before this was passed, are you eligible? If you purchase on or after April 9, 2008 then Yes you are eligible.

When will this credit expire? July 1, 2009. So start looking. There is no better time than now, to get a great deal. You will be able to buy a great house now with how much inventory there is out there and how home values have dropped.

Also, this can be used against Alternative Minimum Tax so this will not throw you into AMT.

So, I hope I have cleared up some of your questions about this credit or helped you make a decision regarding purchasing or waiting. If you are able to purchase a home, you should. There is no better investment than buying a home. So get out there and invest in yourself!

The best way to see if you are eligible for this credit and get all the guidelines is to speak with your tax professional.

Click here for a great Q & A on the credit

Gina Bombin, You’re #1 source to the First Time Home Buyer Credit
McColly Real Estate
Crown Point, Indiana