First-time home buyers are being afforded an unprecedented incentive as part of a new act recently passed by Congress. The Housing and Economic Recovery Act of 2008 gives aspiring home buyers the opportunity of a lifetime which enables them to receive a $7,500 tax credit if they purchase between April 2008 and July 2009. This program has been designed to help first time home buyers, as well as to maximize stimulation in the housing market, and thus the economy overall.
The credit is a reduction in what the taxpayer owes on the federal income tax return, not a tax deduction that is subtracted from the amount of income on which a person’s taxes are based. This program will give the home buyer a large financial resource in the year they purchase, as long as the purchase is closed within the time guidelines. Typically the credit involves the government sending the taxpayer a check for their balance due. For example, if you owed $5,000 in taxes, and you purchased a home, your $7,500 tax credit would be subtracted, and you would receive a refund of $2,500. If the home purchase price is less than $75,000, your credit would be 10 percent of the purchase price.
A first-time home buyer is legally defined as a person who has not owned a residence in the last three years, and if you are married that applies to both of you. The tax credit can be applied to a number of home types, including zero lot lines, condos, townhomes or single family residences, but the home must be a principal residence and not an investment property.
An important aspect of this opportunity is that it does have a repayment policy. Homeowners receiving the tax credit will repay it at 0 percent interest over a period of 15 years, and at a rate of $500 per year, or when they sell their home, whichever comes first. If the home is sold, the repayment of any unpaid amount will be due from the monetary gains of the sale. However, if there is no profit on the sale of the home, the remaining amount due will be forgiven.
This act has many other aspects that will specifically affect the first-time home buyer market, as well as our Middle Tennessee housing market. In coming articles, I will be explaining and examining these components, and defining those important to our local market as well as offering some information on the condition of the housing market in Middle Tennessee.
Jackie Hogencamp is a local Realtor and can be reached at jhogencamp@realtracs.com or (615) 895-4040.
