$8,000 Home Buyer Tax Credit at a Glance

The Economic Stimulus Bill signed by President Obama in February offers first-time homebuyers a tax credit equal to 10% of the cost of their home up to $8,000. This tax credit is available to first-time homebuyers who purchase a home in the United States as their principal residence on or after January 1, 2009, and on or before December 31, 2009.

To qualify as a first-time homebuyer, you cannot have owned an interest in a principal residence in the past three years from the date of the qualifying purchase.

To qualify for the full amount of the tax credit, you must earn no more than $75,000 if filing as Single or Head of Household. If filing a joint return, the buyers may have a combined income of no more than $150,000. There is a phase out of the credit if reported income is more than $75,000.

The tax credit must be taken as a credit from your total tax liability for the 2009 tax year. Also, the tax credit is "refundable," meaning that the taxpayer can receive a tax refund if the credit is greater than the estimated liability.

This credit does NOT have to be repaid, making the tax credit a fantastic opportunity that anyone considering becoming a first-time homebuyer cannot afford to miss.

Further information can be found at www.federalhousingtaxcredit.com or www.irs.gov. This information is provided for general awareness only, and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind. Please consult with your tax professional for complete details.

Takeaways

• The tax credit is available for first-time homebuyers purchasing a principal residence in the U.S.
• The law defines a first-time homebuyer as a buyer who has not owned a home as a principal residence during the past three years.
• All U.S. citizens who file taxes are eligible to participate in the program.

Did You Know?

• Homebuyers who file as single or head-of-household taxpayers can claim up to $8,000 if their adjusted gross income is less than $75,000, for couples filing a Joint Return the income level doubles to $150,000.
• The tax credit is only available for a short time: for the purchase of a home on or after Jan. 1, 2009 and on or before Dec. 31, 2009
• The tax credit is refundable meaning that if you pay less than $8,000 in federal income taxes, then the government will send you a check for the difference.

Why Buy a Home?

There are times when it is better for a person to rent, but most often home ownership has many more benefits and advantages.

About 10 year ago a had a retired aunt and uncle who rented a condo in Las Vegas. Uncle Jim (not his real name) was a retired minister. Throughout his career he and his wife lived in parsonages, which are homes furnished by the congregation while they ministered there.

He and his wife told me that the biggest mistake they ever made was not to invest in buying a home. In their retirement years, when their other retired friends were living in homes that were almost paid off and had appreciated greatly, Uncle Jim and his wife were using a huge portion of their limited retirement money to make expensive condo rent payments. They strongly cautioned me not to make the same mistake they had.

Recent studies are showing that there are many benefits for both the owners and the community for owning your own home, including increased education for children, lower teen-age pregnancy rate and a higher lifetime annual income for children. Besides these, listed below are some of the primary advantages for owning your own house.

1.  More Stable Housing Costs
   Rent payments can be unpredictable and typically rise each year, but most mortgage payments remain unchanged for the entire loan period. If the taxes go up, the increase is usually gradual. This stable housing cost especially important in times of inflation, when renters lose money and owners make money.
2. Tax Savings
   Homeowners can be eligible for significant tax savings because you can deduct mortgage interest and property taxes from your federal income tax, as well as many states' income taxes. This can be a considerable amount of money at first, because the first few years of mortgage payments is made up mostly of interest and taxes.
3. Debt Consolidation
   If you need to, you can refinance a mortgage loan to consolidate other debts (an opportunity you don't have if you are renting.) And the interest on this is also tax deductable.
4. Equity
   Instead of payments disappearing into someone else's pocket, home owners are building equity in their own home. This is often one of a person's biggest investment assets. Each year that you own the home you pay more toward the principal, which is money you will get back when the home sells. It is like having a scheduled savings account that grows faster the longer you have it. If the property appreciates, and generally it does, it is like money in your pocket. And you are the one who gets to take advantage of that, not the landlord. You can then use this equity to plan for future goals like your child's education or your retirement.
5. It is Yours!
   When you own a home you are in control. You the freedom to decorate it and landscape it any way you wish. You can have a pet or two. No one can pop in and inspect your home and threaten to evict you.