The Housing and Economic Recovery Act of 2008 was signed today and that could mean you or someone you know may qualify for up to a $7,500 Refundable Tax Credit.
There are some strings attached to this tax credit that you may not be aware of:
1. First, the biggie: You may have to pay this tax credit back!
I can hear you saying, "What!?"
Let me explain:
Think of the Refundable Tax Credit as a 0% loan from the Government to you.
You have to repay the government for this loan over 15 years, interest free, beginning 2 years from the year in which you claim the credit. Each year after that, you will pay them back (via your tax return) $500 each year. Or, if you sell the home within the 17 year period, you will pay them back in full in the year of the sale. If you sell the home and there is insufficient profit to repay the loan, the remainder of the loan is forgiven.
So, you get to keep $7,500 today but every year (starting 2 years after you claim the credit) you will either get $500 less back on your return, or will pay the IRS $500 more than normal.
If I have confused you, perhaps the graphic below will help:
The government is banking on the housing market recovering and therefore, when you sell your home, it will have appreciated by more than enough for you to pay them back the amount they "loaned" to you at 0%.
2. If you purchase(d) a home for less than $75,000 your credit will only be equal to 10% of the purchase price, not the full $75,000.
There are some additional exceptions for specific transactions, so make sure you check with your accountant and tax adviser before doing anything. They may also know of additional terms and conditions which could maximize the benefits of the Housing and Economic Recovery Act of 2008 which are not explained in detail in these blogs.
The intent of this article is simply to make you aware of an option you might not have been aware existed, and not to advise you to claim the credit or reject it. All financial decisions should be made in consideration of your specific circumstances and with the advice of your Attorney, Accountant, Tax Adviser and other legal and financial advisers.
If you are planning to relocate to the Salt Lake City area, make sure you get an Agent on YOUR side of the transaction!
If you have excellent credit and will be buying a $250,000-$750,000 home in the next 30-60 days and would like an agent who will work exclusively for you, call us at (801) 969-8989 or contact us via the link on this page.
©2008 Homebuyer Representation, Inc. "The Real Estate Agents on the Buyer's Side" ™ Exclusive Buyers Agents (EBA) - All Rights Reserved
Exclusive Buyer Brokerages do not list homes and never represent Sellers. Their agents represent Buyers ONLY on the Buyer's side of the transaction. They work to get BUYERS the Best Price and Terms when they Buy...
©2008 Homebuyer Representation, Inc. - Salt Lake City, UT
Exclusive Buyers Agents (EBA) - All Rights Reserved
*There is much more to the Housing and Economic Recovery Act of 2008 than the $7,500 Tax Credit for First Time Home Buyers, to learn about other provisions of the Act, click here.