One of the ways the U.S. Government is trying to stimulate the economy is through a first time home buyer tax credit in 2009.
Passed as part of Obama’s Stimulus Bill, officially known as the American Recovery and Reinvestment Act of 2009, the credit is a refundable tax credit of $8,000, or 10% of the home’s purchase price, whichever is less, for first time home buyers who purchase a home between January 1, 2009 and November 30, 2009.
For purposes of the credit, a “first time home buyer” is a person who has not owned a home in the past three years. There are also restrictions on income. Home buyers must make less than $75,000 for singles, or $150,000 for couples to qualify for the full credit. (Partial credit is available for higher incomes earners).
The refundable tax credit can actually be claimed immediately, either by filing your 2008 taxes (if you have not filed yet), or filing an amended 2008 return if you have already filed for 2008. Since it is a tax credit, you are entitled to the full $8000, plus or minus either whatever you either owed to the IRS or whatever you were due as a refund.
Obviously, getting $8000 free is nice. But will it stimulate the real estate market enough? I guess only time will tell. Another thing that could potentially happen, is that people will “stretch” themselves when they are not quite ready financially, trying to purchase a home before the deadline of November 30, 2009.
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{ 5 comments… read them below or add one }
I believe it is doing a pretty good job at it thus far. I know of many people who are buying homes now who would have waited, including myself. We are a week from closing. Plus, the real estate agents are claiming to picking up quite significantly on business for first-time homebuyers. With rates at near an all-time low, and the $8000 tax credit, now is the perfect time to cash in on your long-term wealth potential!
@Jim- That is good to hear. Although I do not think I am going to make it in time for the deadline (still paying down debt!), I think it is definitely a good deal if you are ready. Congrats!
I have actually looked at it in a different light. By getting the tax credit, we are able to pay off more debt while at the same time building up equity in our house. Luckily, one of debts is right at $8,000 to be paid off, which will free $265 a month once it is paid for. I guess each situation is different…just something to think about!
I know of at least a couple people looking to take advantage of the tax-break. However, most, if not all of them would have probably bought a house anyways. So I guess they all get a little extra in their tax refund. But I’m just a little bitter that I didn’t get anything for buying a house back in 2007, but I’m sure a lot of people are in my situation.
@Jim- I agree with your thinking- if I was in a little bit further along, I would try to take advantage of the credit also. Sounds like you have a good plan and have thought it out.
@El Cheapo- I understand you feeling that way- I am sure there are others that feel the same as well.