Rescue Bill Announcement Update
Within the Economic Recovery Act HR 3221 signed into law, there is a tax credit up to $7,500 for first-time homebuyers purchasing homes between 4/9/2008-7/1/2009.
What is the definition of a first-time homebuyer?
The law definition is a buyer who has not owned a principle residence during the a 3 year period leading up to the new purchase. For married taxpayers, the law test homeownership history of both the home buyer and the spouse.
What types of homes qualify?
Principle residence. Single-family detached, attached, and condominiums, only.
Here is some more information from the Bankrate.com’s “Mortgage Matters” column by Holden Lewis. For more on the issue and for updates on mortgages and the homebuying process, I highly recommend reading it on a daily basis.
The law will give first-time homebuyers a tax credit of 10 percent of the purchase price, up to $7,500. (A first-time homebuyer is defined as someone who hasn’t owned a principal residence in three years.)
Here’s how the tax credit will work. You buy a $200,000 house. The next year, when you file your income tax return, you have a $7,500 credit. Not a deduction — a credit. Essentially, you get to reduce your income taxes by $7,500. That ought to make for some big refund checks.
But. Yeah, you know there’s a “but.” But you have to pay the money back over 15 years. Say you buy the house this October. You get the $7,500 tax credit for the 2008 tax year. That’s the one with the filing deadline of April 15, 2009. Then you have to start repaying one-fifteenth of that amount, or $500, every year for 15 years, starting with the 2010 tax year.
If you sell the house before then, you have to repay the remaining balance in a lump sum.
What if the home’s value doesn’t appreciate that much, or you get divorced, or you die and your kids inherit the house? Those issues are addressed in the law, but I’m not going to go into that much detail. If you really want the lowdown, go to Thomas, search for H.R. 3221.EAH, and search for the phrase “first-time homebuyer credit.”
For more information about mortgages or buying a home in Boston, contact me.
Source: Mortgage Matters – By Holden Lewis, Bankrate.com