First-time Homebuyer Tax Credit

7500-tax-creditYes, the economy is in the dumps, but if you disregard the media’s portrayal of the current housing forecast you will see that it is actually quite favorable for homebuyers…especially “first-time homebuyers”.  While housing prices may continue to drop, mortgage rates are at historical lows and there are plenty of government programs to help first time homebuyers.

Last fall, the government passed a bill which provides a tax credit of $7,500 to first-time homebuyers.

Although this is not new news, there have been many crazy variations of what the $7,500 tax credit means to you.  As your Roswell Realtor and also a licensed CPA, I do feel that we need to clear this up.

  1. The tax credit is not free money, but is actually a zero interest loan for 15 years.  This means that you do indeed have to pay back the “loan”, but you can save a lot of money on interest payments.
  2. Under the legislation,  a first-time homebuyer is defined as anyone who hasn’t owned a home as their principal residence in the last three years. It is important to note this distinction as you may not have thought you qualified if you weren’t a real first-time homebuyer.
  3. The first-time homebuyer criteria applies to both spouses if married.
  4. The closing date of the house must fall between April 9, 2008, and June 30, 2009.
  5. Your modified adjusted gross income (MAGI), which is all of your income on your tax return before taking deductions must not exceed $75,000 for singles and $150,000 for married taxpayers.
  6. You are required to pay back the loan, but have two years after applying for the tax credit before you must start to make payments.  You can also repay the loan from the profit of reselling the home, if you choose to sell within 15 years.  If you do not make a profit on the sale, the remaining tax credit loan is forgiven.  Otherwise, the tax credit loan is due within 15 years in annual payments.
  7. You do not have to claim a full $7,500 tax credit. And you can only claim the full $7,500 if you buy a home for $75,000 or more. Homes worth less than $75,000 will qualify for a tax credit of 10% of the purchase price.
  8. Since this tax credit is refundable (you can receive it as a tax refund after filing your federal tax return), the immediate advantage is what you can do with it.So here’s my tip and the reason you’ve read this far – if you’re thinking about buying a home in the next few months, wait to file your tax return until the day after you close, so you can claim it against your 2008 tax return. Tip #2 – don’t forget to file an extension if this means you would file after April 19.
  9. Consult a tax professional for the finer details of the tax credit.

A poor economy does not mean it is not a good time to buy a home, actually it is quite the opposite.  This is a great time for buying a home if you have a steady, secure job, and a good credit score.

There are a lot of great Roswell neighborhoods. Whether you’re looking for Roswell new construction, a “certified, pre-owned” home or perhaps a townhome or condo, there is a great selection currently available to choose from.

Click here for an up-to-date list of Roswell homes for sale.

If you have more questions about the tax credit or just wondering if now is the time to start looking for your home, contact us and we’ll be glad to help you.

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Founder of and partner of The H2 Realty Group at Atlanta Communities, he is your local real estate expert. Coming from a professional services background, Aaron has made the commitment to offer world-class service that homebuyers and home sellers deserve. Aaron uses his financial, marketing and technology expertise to ensure his clients receive the best service possible. Find Aaron Hofmann on Google+

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