A lot of people are curious about the $8,000 tax credit for new buyers offered by the federal government as part of the stimulus plan. People are also confused about how it works.
OK, does this mean you might get an $,8000 check from the government - gratis, no paying back?
the source for the information that follows.This tax credit is for first-time home buyers only. However, that's not as simple as it sounds.
You may be saying to yourself, "I don't own a home now, but I did five years ago," and wonder how that applies to you.
Well, good news: you fit the criteria. For this program, the IRS defines a first-time home buyer as someone who has not owned a principal residence the last three years prior to the purchase.
"But, do I have to pay it back?" is another important question.
Last year's $7,500 credit did have to be paid back over a period of time. Not so with with this new credit. This is free money, people.
The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000. Translation: You buy a $150,000 house. Ten percent is $1,500. Your tax credit is $,8000. You buy a $70,000 house. Ten percent is $7,000. Your tax credit is $7,000.
Because I haven't seen a habitable abode in Fort Mill for $70,000, you are pretty safe to count on $8,000.
This offer is not on the table for long, however. You must purchase a home between Jan. 1, 2009, and Dec. 1 (not
Dec. 31!), 2009.
Is this for everyone? No, and of course there is a catch - but not a bad one. The income level includes quite a few of us: single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Above these levels, the credit is gradually phased out. The tax credit is reduced to zero for taxpayers earning more than $95,000 (single) or $170,000 (married).
Now, one more catch - and read closely. Home buyers must use the purchased residence as a principal residence for at least three years or face possible repayment.
How do you claim this credit? Easy. Claim it on your federal income tax return next spring. If you paid and owe $5,000, then the government will send you a full refund of the $5,000 you paid in, plus $3,000 for the rest of the credit.
Now, don't go buy a house just to get $8,000. But, if you are considering a purchase in the next few years, now truly is the time to buy. Never before have both prices and interest rates been so low at the same time.