Skinny Skoop on Housing Relief Tax Credit

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Skinny Skoop on Housing Relief Tax Credit

Last month Mr Bush signed HR 3221 the American Housing Rescue and Foreclosure Prevention Act into law. It brings tax breaks for homeowners and tax credit for first timeFirst time home buyer home buyers.This is a great tool for consumers. A Tax refund back into the pockets of buyers. The federal government will credit buyers on their personal income tax return the year after the purchase of their first home. Then the 2nd year the purchaser begins to pay back the tax credit over a 15 year period.

Here are some features of the economic incentive:

-If a potential homebuyer has not owned a home in the previous three years to the current purchase he qualifies as a first time home buyer. No one else may participate in this fabulous deal. And your head of household income can be no more than $75000 if filing your tax return singly. You could receive a partial tax refund if your income is between $75-95000.

– Your home purchase must occur between April of this year and July 1 2009. No procrastination.

So here’s an example for those of us mathematically challenged folks: If a purchaser’s taxes due are $5000 then after the tax credit is applied to the 2008 totals the buyer would receive a refund of $2500. The refund sum is the difference between the $7500 tax credit and the amount of taxes you owe.

Reverse example is if a purchaser’s tax refund is $2000. After the housing relief tax credit is claimed the buyer would receive a total refund of $9500.

-One more caveat, you have to pay back the government. No it is not free. But it is interest free 🙂 The buyer must pay six percent of the total housing credit each year for the 15 year term.

My final example assumes the purchaser applies a $7,500 credit in 2009 on their income tax return. The home purchase closed in 2008. He receives the tax refund in 2009. Remittance commences in 2010 with an annual repayment of $500 per year. That’s a good deal.

The dark side to this deal: it’s not a credit. The tax incentive is basically an interest free loan. So if you qualify, DO YOUR RESEARCH! There are strings attached. I’ve given you the bare-bones basics. Go do your own homework. The fact that my tax dollars (MY tax dollars) are going to fund someone else’s home, eh I see the good and the bad. That’s a whole other blog entry for a moral discussion.

The other bummer is that this doesn’t help with down-payment assistance. You have to come up with that cash by yourself. If you find a home for $100k, your lender may ask you to cough up $10000 upfront. So put some savings into a liquid account with no penalties for withdrawals. And lending is still tight – you have to qualify for this program and qualify separately for a loan.

My Skinny Skoop: This is a great deal for first time home buyers with strings attached. Be informed! Call a REALTOR like me 😉

Kind regards,

Cindy Seaton with Century 21, Beal

1 Comment

  1. Yes!!! There are many strings attached and we may find that the law is better for politician’s careers and newspaper articles than consumers BUT it is sure worth a try.