First time homebuyer Credit doesn’t mean you have to actually be a first-time buyer to qualify. And personally I think credit is the wrong word too.
During the summer President Bush signed the Housing Assistance Act of 2008. It allows first-time buyers (homes) a tax “credit” to the lesser of $7,500.00 ($3,750.00 if married filling separate) or 10% of the purchase price of a home. {Meaning if your home that you are buying only cost $45,500.00, your so called credit won’t exceed $4,500.00}
What is a first time home buyer? Well for this purpose it is described as an individual who had no present ownership interest in a principal residence for the three years prior the purchase of the home. If you are married both spouses’ must meet this requirement.
This “credit” is available for houses purchased after April 8th , 2008 and before July 1st, 2009.
Have you ever heard the phrase “If it sounds to good to be true it probably is.”? Well this in my opinion is one of those times. The “credit” has to be paid back. So is it a credit or a loan? Well, you decide. You must pay this back over a period of 15 years from your tax return. You have to start paying this back with the second tax year after the residence was purchased. No you only have to pay it back if you take the credit. You take the credit, two years later start paying it back.
So lets say you buy a $75,000.00 home and you elect to take this credit. You’ll get a credit of $7,500.00. In two years you will add back to your return (subtract from a refund, add to an amount due) $500.00 And will keep doing this for 15 years. There will be phase outs for income and a few other rules but that is the just of it.
Seems more like a loan than a credit to me.
I have a few clients who will qualify for this so called credit and I have already called and visited with them about it. I advised them of all the situations that applied to them and asked them to discuss it amongst themselves then to re-visit the issue come time to prepare their returns. As to take it or not I am not advising anyone in this, My view is that Taxes are high enough, new homeowners from my client base are young couples (one individual) starting out and having a tax liability for the next 15 years seems a bit questionable.
