Good News For Home Buyers

Good news for folks considering buying their first home, or those re-entering the housing market. Congress recently approved a new housing bill with major cash benefits to buyers. If you have not owned a house during the past three years, or are considering buying your first home, and
can go to closing before June 30^th 2009, you may be eligible for up to a $7,500 credit against your federal taxes for 2008 or 2009 ($3,750 if you file taxes as a single person).

Buy any house -- new, old, any location or condition, any price range and close by June 30^th 2009-- and the IRS will cut up to $7,500 off your tax bill for either this year or next. For example, if you're an eligible buyer of a home this year and you owe the IRS $4,000 on your total 2008 income tax bill, your $7,500 tax credit could wipe out everything you owe plus get you a $3,500 refund. If your tax bill is less than the credit amount, you get the difference back from the Treasury.

Do you own a home now? If so, you're not eligible for the credit. Did you sell your home more than three years ago and now rent? You are eligible. The same is true if you've never owned a home before. Close on a house before next June 30, and you can claim a credit of up to 10 percent of the purchase price of the property up to a maximum of $7,500. If your adjusted gross income exceeds $150,000 ($75,000 for singles), the credit maximum begins to phase down in increments. You cannot claim the credit if you are a nonresident alien, financed the property using a tax-exempt bond mortgage, or do not plan to use the house as your principal residence.

The program requires homeowners to make repayments, starting in the second tax year after purchase and continuing up to 15 years, through their federal income tax filings. Over a 15-year payback period for the full $7,500 credit, the cost would be $500 a year. If you sell the house before the end of the repayment period, and you have no gain on the sale, you won't be expected to pay the credit back from the proceeds. If you have a net gain, the "recapture" cannot exceed the amount of your gain.

How do you claim the credit? You simply request the credit on your tax return for either 2008 or 2009. Even if you purchase in 2009, you can take the credit against your 2008 taxes by filing an amended return. Information courtesy Washington Post