The new Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time homebuyers! You have to purchase your first home between April 9, 2008 and June 30, 2009. The purchase date is the date of closing. The income limits for the credit are $75,000 for people filing single status or $150,000 for those filing married. The tax credit is refundable, meaning that if you owe little or no federal taxes the government will still send you a tax refund after you file your tax return.
If you purchase a home using a first time homebuyer program financed through a mortgage revenue bond program, you are not eligible for the credit. For example if you buy a home using Minnesota Housing’s MMP or CASA program, you will not be able to take the tax credit.
The credit does have to be repaid to the government over the next 15 years or when they sell the house, if there is enough capital gain from the sale. For example, a home buyer claiming the $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making the payments until 2 years after the credit is filed. If the home owner sold the home the remaining credit would be paid back from the profit of the sale, if there is not enough profit the credit would be forgiven. Congress’s intent was to provide as large a financial resource as possible for home buyers in the year they purchase a home. The repayment requirement reduces the effect on the Federal Treasury and assumes that home buyers will benefit from stabilized and eventually, increasing future housing prices.
If you have owned a home in the past, but not in the last 3 years, you will still qualify as a first time home buyer. The credit applies whether you buy a new house or a existing house. If it is a newly constructed house, the date of first occupancy must be between April 9, 2008 and June 30, 2009.
There is more information available at www.federalhousingtaxcredit.com.
