Tax Time! First Time Homebuyers Can Take Credit!

The Housing Assistance Tax Act, which is a section of the Housing and Economic Recovery Act, provides some incentives allowing qualified first time homebuyers a tax credit that puts money in their pocket. Do you qualify?

If you were (are or will be) a first time homebuyer who bought/buys a home between April 9, 2008 and June 30, 2009, you may be eligible to receive a tax credit. This tax credit is basically a fifteen year loan that you payback without interest. This incentive can benefit many people, and is a great way to finance some home improvements.

You have to qualify for the benefit, naturally. And the amount for which you can qualify varies. You have to be a first time homebuyer, as mentioned above (and that includes your spouse if you’re both on the loan) who has had no ownership interest in a principal residence for the past three years (date of your home purchase). You see, in the mortgage world, if you haven’t had a mortgage within this time frame, the fact that you owned and sold a home five years ago doesn’t count.

You can’t use the tax break if you obtained a THDA (Tennessee Housing Development Agency) loan because the thought process is you already benefited from proceeds from a tax-exempt revenue bond. No double dipping allowed. You also can’t be a non-resident alien, and you have to keep your home for at least a year to claim this particular tax benefit. So, if you’re transferred and have to sell your home in six months after you closed on it, you’re out of luck.

The amount you earn to qualify has a cap for income. If you’re single, the benefits available start to dwindle if you earn more than $75,000 per year, or $150,000 for joint filers. It’s unavailable completely if you earn $95,000 individually or $170,000 jointly.

The tax credit you can claim is equal to the lesser of $7,500 or 10% of the price of the home. Thus, if you buy a $65,000 home, you can claim $6500. But, if you buy an $85,000 home, you can only claim $7,500. The main catch is you have to pay the credit back to Uncle Sam over the next 15 years. However, it’s interest free. You start the pay back the second tax year following your home purchase. If you sell your home before you’ve settled your debt, you have to pay it back sooner. But you won’t owe the full amount of the outstanding credit due if your gain from the sale of your house is less than what you owe.

So is this deal a good one for you? How could you take advantage of it? Well, again, view it as an interest free loan. You can upgrade appliances in your kitchen, finish out a basement or do some landscaping for this type of money. It can work to your advantage. But make sure you qualify before attempting to take this credit. It’s not the type of thing you want to take lightly as filing your taxes is serious business. And if you do qualify and it makes sense for you, spend your money wisely! Increase the value of your home with this interest free loan. Now that’s easy money.

Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.


Tax Credit, Housing Assistance Tax Act, THDA, IRS, Home Loan Plain Talk, Mortgage Specialist, Kristin Abouelata