Last week, Congress passed a new comprehensive housing bill. Among its components is a significant tax credit available to new home buyers. Kenneth Harney’s “The Nation’s Housing” column in The Columbus Sunday Dispatch, August 3, 2008, does a good job of describing the basics of this benefit for new home buyers.
Michelle Singletary’s July 31, 2008 “The Color of Money” column at WashingtonPost.com (requires free registration to access) provides additional analysis.
“A tax credit is much more valuable than a deduction. A credit reduces dollar for dollar the amount of tax you owe. A deduction merely reduces the amount of your income that is taxable.” – Michelle Singletary
For those with a short attention span, here are some important elements.
Eligibility
- Must purchase between April 9, 2008 and June 30, 2009.
- Must be new home owner (first home purchase or haven’t owned a home in the past three years).
Benefit
- Up to $7,500 tax credit ($3,750 for singles each for married couples filing separately) that can be applied against 2008 or 2009 federal income tax (technically, 10% of purchase price with a maximum credit of $7,500).
- Reduced benefit for those with adjusted gross income greater than $150K ($75K for singles).
- If your tax liability is less than the credit, the remaining credit will become a tax refund to you.
Strings
- Home must be your principal residence.
- The credit must be repaid starting the second tax year after purchase.
- Up to 15 years to repay-no interest charged (a full $7,500 credit would require a $500 a year repayment-about $41.67 per month).
- If you resell before fully paying off the credit, you won’t have to pay more than any net gain you make from the sale.
More Information
- The National Association for Homebuilders is hosting an informative and consumer-friendly Web site with even more details.
October 31, 2008 at 3:01 pm |
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