Congress May make $7,500 Home Buyer Tax Credit More Attractive

This article in LA times caught my eyes because it is a great benefit to a lot of my clients who are 1^st time home buyers and could benefit from this tax credit. Maybe it can buy a few pieces of new furniture and a 62" LCD TV for the new home.

On January 15, the House Democratic leadership outlined its $825 billion economic stimulus package, loaded with $275 billion in tax cuts and $550 billion in new spending on healthcare, education, and alternative energy and infrastructure improvements. In the tax section was a significant improvement to last July's congressional effort to stimulate home sales. It offered a credit of as much as $7,500 to buyers who had never bought a house or hadn't owned one during the last 3 years. To qualify, taxpayers would need to complete a home purchase between April 8, 2008 and July 1, 2009. This $7,500 might not be as attractive as it sounds because it has to be repaid to IRS over 15 years. It is more like an interest-free installment loan from the government than a straightforward reduction on buyer's tax payable.

However, final details are still subject to negotiations between the House and Senate. There's a good chance that the repayment requirement will be removed. Industry estimated removing the repayment rule could lead to an additional 202,000 purchases this year. The National Association of Realtors is pushing to extend the deadline of July 1 to December 31 to attract even more sales.

Here are the few key notes to be qualified based on the latest IRS guideline:

1. The credit operates like an interest free loan because it must be repaid over a 15-year period.
2. The credit is 10 percent of the purchase of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing a joint return; $3,750 for married persons filing separate returns
3. Taxpayers who owned a main home at any time during the three years prior to the date of purchase are not eligible for the credit. This means that first-time homebuyers and those who have not owned a home in the three years prior to a purchase can qualify for the credit.
4. Only principal residences -- or in the IRS' words, "the one you live in most of the time" -- are eligible. No second homes, investment properties or houses outside the U.S. pass the test. But the definition of "home" extends far beyond conventional houses sited on lots. It "can be a . . . houseboat, house trailer, cooperative apartment, condominium or other type of residence," according to Form 5405.
5. Vacation homes and rental property do not qualify for this credit
6. Income Limits: For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000.

Click here to view the complete info on First-time Homebuyer Credit Information Center on IRS and click here to download the IRS Form 5405 for First-time Homebuyer Credit. Be sure to check out the last Q & A on "Who cannot take the credit"

If you are eligible for the credit, this is a good time to purchase a house that you could called your own. You can also take advantage of the lower house prices and record low mortgage rate. Why not right?

I provide both real estate services and mortgage services. If you need real estate advice, feel free to contact me or visit www.wsprops.com.If you are interested in seeing if now could be a good time to refinanance your home, or get pre-qualified for a loan to purchase a property, don't hesitate to contact me or visit www.realpromortgage.com.