WOW! Those who were hanging back, waiting for the right time to buy, have jumped in with both feet. First time home buyers are definitely "in the market" now and hoping to take advantage of the $8000.00 federal tax credit. Yes...it is a tax CREDIT, not an income deduction. Home buyers who buy and close before December 1, 2009 can reduce (or even eliminate) their income tax liability for the year of their home purchase by claiming the credit on their tax return. Of course, as with any mortgage application, certain qualifying criteria must be met. And, for the tax credit, there are also several qualifying criteria:

  • A first time home buyer is defined as someone who has never owned a principal residence or has not owned one in the last three years. If married, both parties must qualify under this rule.
  • Available to single taxpayers with annual incomes up to $75,000 ($150,000 on a joint return)
  • Partial credit available for taxpayers with annual incomes from $75,001 to $95,000 ($170,000 on a joint return)
  • Available ONLY for the purchase of a single family home, townhome, condo or new construction that will be used as a principal residence (investment properties or vacation homes are not eligible)
  • The tax credit does not have to be repaid if you stay in your home for 3 years or longer. If sold before the 3 years are up, the first time home buyer (now the seller) must pay the IRS the entire amount of the tax credit at closing.

This is such a sweet deal for those who qualify! Imagine this scenario: Junior meets all the qualifying criteria but he lacks cash. He (or she) asks Mom & Dad for $8000 so he can make the 3.5% FHA required minimum down payment on that $228,500 home that his Realtor, Dave Oswald, helped him find. The sellers of the home are paying his closing costs and they'll close before December 1, 2009. Junior promises to pay his folks back the eight grand as soon as his federal tax refund comes in after he files his return for 2009. He gets the tax credit and turns it right over to Mom & Dad. They get repaid and launch Junior out of their house (finally!) and he can live his own life out from under the microscope (finally!) Everybody wins and the U.S. economy gets another stimulating shot in the arm!

You should consult your tax advisor for a detailed assessment of your personal income tax situation and to verify your qualifications for the First Time Home Buyer Tax Credit. Then, you should call me if you or anyone you know is looking to buy or sell real estate. Thank You!