One of the major real estate related topics of the Obama stimulus bill is the first time home buyer tax credit. While nothing is set in stone as of right now here is a rough play-by-play.
The Tax Credit Right Now:
-As of right now, first time home buyers who fit w/in income guidelines of not more than $95,000 per individual and $170,000 for married taxpayers get a $7500 tax credit if they purchase a home.
-The easiest way to explain a tax credit is by example. Say after doing your 2008 taxes you realize you owe the IRS $2000. After applying the $7500 tax credit to that you would actually get a refund of $5500. Another example would be if your refund was going to be $1500 and then you applied the tax credit, you would actually get a check from the IRS for $9000. Pretty sweet deal huh?
-However, there is a small catch. The Tax Credit as it stands right now has to be paid back. It is considered an interest free loan for 15 years. After the first two years you must start paying it back at the rate of $500/year.
The Original Proposal for the Stimulus Bill:
- The original proposal for the stimulus bill was to increase this tax credit to $15,000 and make is so you wouldn’t have to pay the loan back.
The New Proposal Set to Be Finalized by the President This Week:
-After long negotiations the “final plan” is that the credit will be increased to $8000 and also made so it won’t have to be repaid.
My Thoughts: This is great for first time home buyers and hopefully will get some people off the fence. We have clients that when combining this with some developer incentives at new projects are getting a significant amount of cash to play with which can be put towards upgrades, future condo fees, etc. I think to really make this an effective proposal and stimulate the real estate market it has to become available to every purchaser, not just first time home buyers.
Related posts:
- Breaking News | Senators Agree to Extend Homebuyer Tax Credit Christina Longo at Prospect mortgage sent me the following...
- New $8000 Tax Credit Loan Program for Down Payments and Closing Costs Our good friend David Bolton over at Prospect Mortgage...
- Make November 16th Your Personal First-Time Homebuyer Tax Credit Deadline! Brian Cavanaugh of Wells Fargo Home Mortgage just sent...
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