These are difficult economic times, but often it’s the hard times that open up opportunity. Aspiring homeowners now have more incentive to purchase real estate than ever before. Because of the very economic realities that have caused such an upset in the real estate market, many simply can’t afford to own their own home. President Obama’s massive economic stimulus package, however, has a special provision aimed at first time homebuyers. The $787 billion law sets aside $2 to 8 billion for tax credits aimed at first time homeowners as well as those who make energy improvements in their homes.
The provision boils down to an $8,000 homebuyer tax credit or 10 percent of the home’s value, whichever is less. Available only to first time homebuyers, the tax credit serves to reduce a homeowner’s tax liability. If one’s taxes are less than $8,000, that person will be issued a check for the remaining credit. The homebuyer tax credit is designed to entice first time homeowners to purchase real estate in hopes of jumpstarting the economy.
The home purchased needs to be the primary residence. The sale must take place between Jan. 1, 2009 and Dec. 1, 2009, and buyers must meet certain income requirements. To qualify for the tax, single citizens must make less than $75,000, while couples must make less than $150,000. The tax credit does not require repayment and does not constitute a loan.
The senate had called for a $15,000 homebuyer tax credit, but the bill was stripped down to an $8,000 homebuyer tax credit.
The home must not be resold for three years; otherwise, the buyer will have to pay the tax credit back.
To apply for the tax credit, simply claim it on your income tax return. For anyone buying a home for the first time, the credit is like money in the bank that’s guaranteed to arrive shortly after filing your taxes.
Other tax credits included in the tax package include incentives for homeowners to make their homes more energy efficient. Homeowners can recoup 30 percent of the cost of installing any energy savings improvements, up to $1,500 worth of improvements. The package includes over $40 billion for the tax credit and helps to fulfill Obama’s call for better energy efficiency.
Thanks to the tax credit, more people find it possible to own their own home for the very first time. Its effect on the economy may be moderate, however, as first time property owners make up only a small fraction of all real estate deals. The provision does allow more homeowners to establish a financial foothold towards better economic security.
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