I’m from the government and I’m here to help you.
It’s official. The stimulus bill, aka “American Recovery and Investment Act of 2009″ was signed into law on Tuesday complete with a revamped home buyer tax credit, or as I affectionately call it: free money.
Should the government step in and give people money for buying a home? Is it right or fair? What about people who bought a home under the first incarnation of the home buyer tax credit? What about folks who bought before any such tax credit?
Worthy questions. But now that it’s done, the question of the day is how does it work?
Dear Bullhead City Blog reader: If you know anyone who has not owned a home in the last three years, please take a moment to share this article with them. Thanks.
The Check is in the Mail
If you have not owned a home (principal residence) in the last three years you quite likely qualify for the tax credit (free money) if you buy a home before December 1, 2009. Here’s how it works:
For qualified home buyers, take the amount you would owe in income tax when you file your tax return and subtract the home buyer tax credit from that amount. If you would owe $10,000 in income tax before the home buyer tax credit, and you get the full $8,000 credit, the reduced amount would be $2,000.
More amazing is that if your tax credit is greater than your taxes owed you will get an actual check from Uncle Sam for the difference!
If you owe $2,000 before the tax credit, minus $8,000 tax credit, you get a refund check for $6,000.
Note this is not a tax deduction reducing the amount you are taxed on, but a credit reducing your taxes owed.
How is the new home buyer tax credit different than the last one?
The tax credit now in effect applies to homes purchased between January 1 and December 1, 2009. The two biggest differences between this tax credit and its predecessor, the Housing and Economic Recovery Act of 2008, is that the repayment requirement has been removed and the amount increased from $7500 to $8000. The actual amount of the tax credit is 10% of the purchase price of the home, up to the cap of $8,000, and is available to first time home buyers who meet the income requirements of $75,000 for single taxpayers and $150,000 for married tax payers filing joint returns.
We now pause for a message from the CYA department:
I am not a tax guy, CPA, tax attorney, or bookkeeper. I am passing on information as I understand it. I strongly encourage you to seek further information from a qualified tax professional.
It sounds too good to be true
I’ve been in real estate for almost thirteen years and I’ve never seen an opportunity like this for first time home buyers. There are site built houses on the market in Bullhead City right now for less than $80,000. A qualified first time buyer with a 10% down payment could get the entire down payment back with their next tax return. This combination of affordable prices, low interest rates, home selection, and free money for down payment via the home buyer tax credit is a whopper.
Please help spread the word. The window of opportunity to take advantage of this is pretty small and the press on the stimulus bill has been pretty confusing.
Bonus Tip: Home purchase in 2009 can be claimed on your 2008 return
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
See the entire Frequently Asked Questions About the Home Buyer Tax Credit for loads of great info and answers to all your questions or shout if I can help.
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