Most Americans, or approximately 80%, are not aware that on July 30, 2008, President Georgia Busch signed H.S. 3221, the Housing and Economic Recovery Act, into law.  This new legislation allows first-time home buyer(s) to take advantage of a $7,500 tax credit so they may purchase a single-family home, townhome or condominium unit.  If the new prospective home buyer(s) have not owned a single family home during the past three (3) years and are United tates citizens who file federal income tax returns, they are now eligible for a tax credit of $7,500 from their favorite Uncle Sam.  Even first time home buyers who are not citizens of the United States may be eligible for this tax credit.

In order to qualify for the $7,500 federal tax credit, the home buyer(s) must close the transaction on their newly acquired home on or after pril 9, 2008 and before July 1, 2009.  This federal tax credit program does not have income limits for the first time home buyer(s).  The single or
head-of-household taxpayer may claim the full $7,500 tax credit if their adjusted gross annual income is less than $75,000. For those married couples who are filing joint federal tax returns, the combined gross annual income limit allowed by Uncle Sam is $150,000.  Unfortunately, the $7,500 federal ax credit is not available for single taxpayers whose adjusted gross annual income is above $95,000.  For married federal taxpayers filing jointly, their annual adjusted gross annual income may not exceed $170,000.

The refundable tax credit means that if a taxpayer pays less than $7,500 in federal income taxes for the year, Uncle Sam will tender a check to the eligible taxpayer for the difference.  To clarify, if the eligible taxpayer owes $5,000 in federal income taxes, the eligible taxpayer would pay nothing and a $2,500 payment would be sent to them by the Internal Revenue Service (IRS).  In other words, if the first time home buyer(s) were due a $1,000 tax refund for the year, they would be eligible to receive $8,500 from the Internal Revenue Service (IRS).

The first time homebuyer(s) may take the $7,500 federal tax credit on their 2008 or 2009 federal tax return.  For example, those eligible first time homebuyers who purchase a home in 2008 may take the $7,500 federal tax redit in 2008.  Those eligible first time homebuyer(s) who purchase a home in 2008 and/or 2009 may take the $7,500 federal tax credit in 2008 or 2009.

Unfortunately for the first time homebuyer(s) the $7,500 federal tax credit program has a repayment  provision.  The $7,500 federal tax credit is an interest-free loan from Uncle Sam which must be repaid by the first time homebuyer(s) over a fifteen (15) year period.  The first time homebuyer(s) may choose to repay the iinterest-free loan back to Uncle Sam over a period of 10 years at $750 per year.  If the first time homebuyer(s) decided to sell the home any time within the first ten (10) years, the remaining federal tax credit would be due and payable from the profit/equity of the home sale.  If the equity/profit was not adequate to repay Uncle Sam from the sale of the home, the remaining federal tax credit due and payable would be forgiven by Uncle Sam.

Tags: Investment, Mortgage, Real Estate, tax incentive

This entry was posted on Monday, September 1st, 2008 at 1:53 pm and is filed under Dr. Martin, Investment, Mortgage Finance, Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.