New $7,500 Tax Credit For First Time Home Buyers.

Another incentive for us to really start looking at more homes around here is the new $7,500 tax credit available to first time home buyers:

Buyers who have not owned a home in the past three years can take a tax credit worth 10% of a home’s sale price, up to $7,500, whichever is smaller. The credit is good for homes closed on after April 9, 2008 and before July 1, 2009, and can be taken on taxes filed during 2008 or 2009. Even buyers who bought a home before the bill passed, but after April 9, can claim the credit.

Unlike tax deductions, which only offset taxes by lowering taxable income, the tax credit is a straight dollar-for-dollar deduction of your tax bill. So a buyer who would ordinarily pay $8,000 in taxes would pay just $500. Buyers must to start paying back the loan within two years, at a rate of no more than $500 a year for 15 years. When the the home is sold, any outstanding balance will be repaid from the profit; if it’s sold at a loss and the difference will be forgiven.

Although you have to pay it back, it still looks like a good idea that might get more than a few people into the market. I know I would like to take advantage of what amounts to an interest-free $7500 loan from the government, that has very favorable repayment terms!

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Comments (3)

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  1. Start-Up says:

    I’m very happy about this tax credit as I am purchasing a condo on October 3rd. Unfortunately I won’t be able to use the money for my down payment, but I’m sure I can find a way to put a 7500 interest free loan to good use.

    There is another interesting provision of the bill that I might be able to take advantage of. Since I will only have mortgage payments and property tax payments for three months, I will most likely still use a standard deduction instead of itemizing. This bill will allow me to increase my standard deduction by the value of my property tax payments, with a cap of $500. I’ll take any deduction the government will allow me to.

  2. […] New $7,500 Tax Credit For First Time Home Buyers. – I SO wish they would do something like this for all homebuyers, not just first time. I really hope this does help the market though, as I need to sell my house! […]

  3. […] New $7,500 Tax Credit For First Time Home Buyers at My Two Dollars […]