Everyone Should Claim Their Tax Credit — Even if they Don’t Qualify for a Mortgage!
The Obama administrations economic stimulus package provided for many things including a tax credit for homebuyers who qualify as first-time buyers. This tax credit would equal either 10% of the homes value or $8000, depending on which amount is less. This portion of the stimulus package was included in an effort to energize the real estate businesses by giving homebuyers a good reason to invest in new homes before December 1, 2009. This is good news for people considering a home purchase and more particularly in areas where home values have already reached the bottom of their cycle.
Although there was a tax credit passed by Congress in July 2008, it was really nothing more than an interest free loan because the credit needed to be repaid. The new tax credit does not need to be repaid; it does not act like a loan but rather functions like a grant.
To qualify as a first time homebuyer, the buyer cannot have owned a home within the previous three years. Homeowners who sold during the bubble without purchasing again may well qualify as a first time purchaser under this stimulus provision. There are certain restrictions to the tax credit; a purchaser may not buy a home from family. For these purposes family means parents, grandparents, children, a spouse or the spouses parents. However, there is tolerance in the plan for owning rental property or a vacation home that has not been used as a primary residence.
Be aware that income restrictions apply. For full credit individuals cannot make more than $75,000 a year and couples who file joint returns cannot make more than $150,000. However, income can exceed these amounts but the tax credit amount will be smaller than the $8000 or 10% of the homes value. Individuals are ineligible for this tax credit if their income reaches $95,000, as are couples (filing jointly) with income exceeding $170,000.
For the tax year 2008 homebuyers that qualified were allowed by the IRS to file an amended return; this meant they could receive a refund in less than three months.
The economic recession brought about the creation of this tax credit plan in order to help middle class families be able to purchase new homes. However, the tax credit will not keep anyone from making a poor choice in his or her home purchase. The wise homebuyer will always take a close look at the local real estate market and in particular the property they are considering to evaluate whether home prices have reached their lowest point or not. Once this information has been studied then the tax credit dollars could be the answer for those purchasing a home in these economic times.
Wendy Polisi is the founder of Credit Repair College and Finance the Dream. Their video training is designed to allow consumers to take control of their financial future by learning the insider secrets of credit repair. For more information on free credit repair, please visit them on the web. Finance the Dream helps people looking for a lease option home take advantage of the $8,000 tax credit.
