Well, here are the results of the economic stimulus bill that was passed into law this past week. First time home buyers score big with an $8,000.00 credit or 10% of their homes value (whichever is less) on their 2008 or 2009 federal income taxes.

The huge benefit here is that the credit is fully refundable, meaning tax filers will get the entire $8,000.00 back even if the total amount they owed and paid combined was less than that. That should mean money coming back on their taxes for the majority of new home buyers in this area. The stimulus amount acts as money already paid in on your income taxes. Therefore, if you were current all year long on your income taxes and owed nothing at year end (break even), you could get the entire $8,000.00 back as a refund. If you overpaid during the year, that $8,000.00 should be in addition to the refund that you were already getting.

Think about it this way, York County and greater Charlotte area new home purchasers. If you were to go out and find a $100,000.00 home, you would in essence be buying for $92,000.00. If that home were an $80,000.00 purchase, you would be looking at a true cost of $72,000.00. Add to that, the fantastic interest rates currently available, and it is starting to look like a great time to buy your first home.

So how does this all tie in with your tax burden? Let’s say that your federal tax burden for 2008 is $4,500.00, and you are buying a $78,000.00 home in Rock Hill.   Let’s also assume that you have already paid $5,000.00 towards that tax bill. With normal conditions, you would be getting a refund of $500.00. However, under this new stimulus plan, that $500.00 refund would be added onto another $7,800.00 (10% of purchase price in this case since it is less than an $80,000.00 home) for a total refund of $8,300.00. Pretty nice stuff!

To qualify for the tax credit, a buyer must make a purchase between January 1, 2009 and November 30, 2009. In addition, to qualify as a first time buyer, a buyer may not have owned a home for at least 3 years. One last item to note, a buyer must live in the home for a minimum of three years in order to keep the credit. Otherwise, they will be obligated to pay the credit back to the government.

To apply the credit, a buyer just needs to submit the claim on their tax return. No other paperwork should be needed. First time buyers who have already submitted their tax returns for 2008 and wish to take the credit this year would need to file amended returns.

Although this part of the stimulus plan wasn’t as aggressive as the senate’s proposed $15,000.00 non-refundable package that some had hoped would pass and does nothing for those who are not first time home buyers, it is a nice shot in the arm for the housing industry. It is also, better that the current $7,500.00 tax credit, which is no more than a low interest loan, and it should bring an additional 300,000 new homeowners into the market according to Lawrence Yun, a chief economist for the National Association of Realtors.

Buyers will still be required to come up with their own down payments, as the credit would not be applied until after the purchase was made. Some states, however, are already working on creating short term loans which buyers can use to buy. Once the buyer gets the credit back from the fed, they would repay the state. Check with your state to see if this applies to you. 

I hope that this article helps you in making a good decision about becoming a first time home buyer. It is an awfully good incentive. I must also add that this article is intended for general information use only. In no way should you consider this to be tax advice. We are Realtors, not tax attorneys or accountants. The information here was received in a news article, and recreated. While it is the publisher’s belief that the information is correct, please consult a tax professional in your state and area for professional tax advice regarding the tax credit mentioned.

 

Thanks,

 

Ross Harkness, Realtor®/ Builder

(803) 372-8867