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Saturday, 20 September 2008 21:22 |
As part of the “Housing and Economic Recovery Act of 2008” that was recently signed into law, Congress has created a new, temporary federal income tax credit to provide an incentive for first-time homebuyers.
While this is certainly a great opportunity for first time buyers (particualarly since down payment assistance programs are no longer widely available), it's important to carefully read the details to decide if the taking the credit is right for you. It's important to note that the "credit" is essentially a loan. For a complete list of frequently asked questions, click here.
H.R. 3221
Housing and Economic Recovery Act of 2008
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| Amount of Credit |
Ten percent of cost of home, not to exceed $7500 |
| Eligible Property |
Any single‐family residence (including condos, co‐ops) that will be used as a principal residence. |
| Refundable |
Yes. Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year. |
| Income Limit |
Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000, respectively). |
| First‐time Homebuyer Only |
Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase. |
| Recapture |
Yes. Portion (6.67 % of credit) to be repaid each year for 15 years. If home sold before 15 years, then remainder of credit recaptured on sale. |
| Effective Date |
Purchases on or after April 9, 2008 |
| Termination |
July 1, 2009 |
| Interaction with Alternative Minimum Tax |
Can be used against AMT, so credit will not throw individual into AMT. |
| Source: National Association of Realtors |
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