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$8,000 Tax Credit
Before getting too excited about the $8,000 tax credit you should check your borrowing power with the bank by using a mortgage calculator. This will tell you exactly how much you can afford, what your monthly payment will be and how much to account for taxes and insurance each year. It's very important to make sure you'll be able to afford your monthly mortgage payment so that you can live comfortably month to month. Also be sure to check the current interest rates, ARM rates and fixed rates so that you get the lowest monthly payment available.
Now may be the time to take advantage of the $8,000 First Time Homebuyer Tax Credit but you are not sure if you qualify. Today we will be going over everything you need to know to see if its time for you to buy your first house.
Qualifying for the Tax Credit
You have to be considered a First Time Homebuyer, the law defines this as a buyer who has not owned a principal residence during the prior 3 years of the purchase date. If married the law tests both the individual and the spouse. Any House, Condo, Townhouse, Mobile Home etc as long as it is your principal residence can be purchased to qualify, even houseboats qualify. The purchase must be made on or after January 1st, 2009 or before December 1st, 2009. You cannot purchase the home from any of your ancestors such as your parents, grandparents or spouse.
The actual Tax Credit is 10% of the home's purchase price up to $8,000. For example, if you purchase a condominium for $70,000 your tax credit will only be $7,000. You must own the home for 3 years or you will be facing recapture of the funds, although there may be certain exemptions.
There are income limits for the individual making over $75,000 per year and $150,000 per year. At this income you would be subject to a reduced amount. If you have already purchased your house earlier this year your taxes can be amended in order to get your refund right away.
What is the Difference between a Tax Credit and a Tax Deduction?
A Tax Deduction is subtracted from the amount of income taxed. An $8,000 tax deduction with someone in the 15% tax bracket would only reduce their tax liability by $1,200. A Tax Credit is a dollar for dollar reduction of the taxpayer owes. It is also refundable, which means even if you have little or no taxable income to offset the cost the government will still cut you a check for the difference under this plan.
Monetization
Housing and Urban Development or HUD is allowing buyers using an FHA insured mortgage to apply their anticipated towards their home purchase immediately rather then waiting until filing their taxes the coming year. It can be used towards closing costs or required 3.5% down required by FHA insured mortgages. You can also qualify for a tax credit loan to satisfy closing costs and down payment requirements.
It is recommended you consult a tax professional before making your purchase. Now that you know the ins and outs, are you ready to buy your first home? |
