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| Home Moving & Real Estate The Organized New Home Finance What is the New $7,500 Home Purchase Tax Credit All About?
New Home FinanceWhat is the New $7,500 Home Purchase Tax Credit All About?
Congress has enacted a $7,500 tax credit available to purchasers of a home from April 10, 2008 until June 29, 2009 inclusive. The new tax credit was passed as part of the Housing & Economic Recovery Act and is intended, of course, to motivate the purchase of homes and thus to provide a much-needed stimulus to the housing market in the U.S.
Hopefully it will bring homebuyers back into the flat real estate market and help to cut excess housing inventory and slow the slide or plateau in prices of homes.
Many large homebuilder corporations are planning major advertising and promotional campaigns around the new bill.
Here are a few facts about the new tax credit:
1. The $7,500 credit is available on any home purchase (not just newly-built homes) whether a condo or a single family residence.
2. The home must be purchased as and be the buyer's principle residence, not an investment home or vacation property.
3. The tax credit is actually 10% of purchase price or $7,500 - whichever is less, for married taxpayers who file jointly. If married but filing separately, or if single, the tax credit is then only $3,500.
4. The deal must close no later than midnight June 29, 2008. Not just be an offer, or contract.
Be mindful that this is a tax credit not a "tax deduction. A tax deduction is an amount permitted to be subtracted from taxable income before the tax due is figured. A "tax credit" is like a voucher used towards the actual dollar amount of taxes due.
Here's the catch-the tax credit is not a permanent gift. IT must be repaid, $500 per year. For the $7,500 credit, that will take 15 years. But it is a zero interest loan. No repayments required until two years after the tax credit is used. If the house is sold before the entire tax credit has been repaid, it must be repaid from proceeds of the sale.
It would be wise to consult your CPA and/or tax attorney for detailed information as to the application of this new legislation to your own particular set of circumstances.