The housing market has taken about as big a beating as it can. The bailout the government is rolling out to save banks from bad mortgage securities is stunning, but not the only piece of legislation designed to help the housing market.
First time home buyers are critical to real estate markets. It is a step process. Homeowners continually buy and sell to move up from one property to the next. This is how they end up with bigger homes and fuel the market.
This process starts with first time homebuyers. They are critical to the system. Without them, there is nobody moving up from the bottom and the system will come to a grinding halt.
A variety of factors have resulted in a tiny first time homebuyer market segment. This is killing the housing market, so the government has made an effort to get first time buyers back into the market.
The Housing and Economic Recovery Act of 2008 is the magic pill. It provides a tax credit of 10 percent of the purchase price of the home up to a maximum of $7,500. Only the government would think a $75,000 home can be found, but there you go.
A tax credit is a beautiful thing. Why? It is applied directly to the tax amount you owe after doing your taxes. If your accountant tells you a check for $3,000 is due to the government, a tax credit is deducted directly from this amount on a dollar for dollar basis.
An example always helps show the power of a tax credit. Assume I can claim a tax credit of $5,000. Assume I owe the IRS four thousand dollars at the end of the year. After applying my tax credit, the IRS now owes me $1,000. Check, please!
Can I actually get back more than I owe? Not always. With this first time homebuyers tax credit, however, I can. It is fully refundable, which means that it is not limited by the amount I owe the IRS.
Before you go rushing off to look at homes, you should know there is a slight catch. Okay, a huge catch. The government wants the tax credit back. You have 15 years to repay it, which means about $500 buck a year if you take the max credit amount.
The amount of money you make also can be a problem. Couples making more than $150k and non-couples making over $75k face a phase out problem. If you are making this kind of money, however, you probably should already own a home.
Everyone gripes about the loss of tax deductions, but they miss the points. Tax credits are the real golden egg for taxpayers. Claim as many as you can. If you are considering buying a home, this one should help a bunch.
First time home buyers are critical to real estate markets. It is a step process. Homeowners continually buy and sell to move up from one property to the next. This is how they end up with bigger homes and fuel the market.
This process starts with first time homebuyers. They are critical to the system. Without them, there is nobody moving up from the bottom and the system will come to a grinding halt.
A variety of factors have resulted in a tiny first time homebuyer market segment. This is killing the housing market, so the government has made an effort to get first time buyers back into the market.
The Housing and Economic Recovery Act of 2008 is the magic pill. It provides a tax credit of 10 percent of the purchase price of the home up to a maximum of $7,500. Only the government would think a $75,000 home can be found, but there you go.
A tax credit is a beautiful thing. Why? It is applied directly to the tax amount you owe after doing your taxes. If your accountant tells you a check for $3,000 is due to the government, a tax credit is deducted directly from this amount on a dollar for dollar basis.
An example always helps show the power of a tax credit. Assume I can claim a tax credit of $5,000. Assume I owe the IRS four thousand dollars at the end of the year. After applying my tax credit, the IRS now owes me $1,000. Check, please!
Can I actually get back more than I owe? Not always. With this first time homebuyers tax credit, however, I can. It is fully refundable, which means that it is not limited by the amount I owe the IRS.
Before you go rushing off to look at homes, you should know there is a slight catch. Okay, a huge catch. The government wants the tax credit back. You have 15 years to repay it, which means about $500 buck a year if you take the max credit amount.
The amount of money you make also can be a problem. Couples making more than $150k and non-couples making over $75k face a phase out problem. If you are making this kind of money, however, you probably should already own a home.
Everyone gripes about the loss of tax deductions, but they miss the points. Tax credits are the real golden egg for taxpayers. Claim as many as you can. If you are considering buying a home, this one should help a bunch.
About the Author:
Mr. Gibson writes for BusinessTaxRecovery.com - where you can find resources regarding on taxes online 24/7. Visit the site to read more of his free articles on tax deductions before preparing your taxes this year.
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