Buy Now, or Wait? (Psst, first-timer? The answer is "Buy")

When all of the Congressional hoopla and political posturing over the nation's housing dilemma had subsided, it appeared as if the $7,500 "First-Time Home Buyer Tax Credit" (for houses purchased between April 9, 2008 and June 30, 2009) is one of the most straight-forward (and truly helpful) answers that our political leaders delivered. Here's a thumbnail summary:


What is the First-Time Home Buyer Tax Credit?

The Tax Credit is part of the Housing and Economic Recovery Act of 2008, signed into law on July 30, 2008.The intent of the tax credit is two-fold:


• To provide a financial resource for home buyers in the year that they purchase a home

• To provide a stimulus to the housing market and the economy, helping to stabilize home prices and increase home sales


The law provides a tax credit equal to ten percent of the qualified home purchase price. The credit is capped at $7,500. The credit is essentially an interest-free loan. Home buyers are required to repay the credit to the government -- interest free! -- over 15 years in equal installments, or when they sell the house.

Who's Eligible?

• First-time home buyers, defined as a buyer who has not owned a principal residence in the previous three years


• U.S. citizens who file tax returns

• Eligible properties include any single-family home that will be used as a principal residence (including condos and co-ops)

• Buyers must close on the sale of the home between April 9, 2008 and June 30, 2009

Income Limits

• The full $7,500 credit is available for individuals with modified adjusted gross income (per IRS definition) of no more than $75,000 ($150,000 for couples filing jointly)

• A partial credit is available for individuals with modified adjusted gross income between $75,000 and$95,000 (between $150,000 and $170,000 for couples filing jointly)

Is the Tax Credit “Refundable?”

• Yes. The credit reduces the income tax liability for the year of purchase

• The credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even the entire amount of the refundable tax credit

Payback Provisions

• Home buyers claiming (as an example) a full $7,500 credit would repay the credit at $500 per year via their tax returns. But they would not have to begin repayments until two years after the credit was claimed.

• If the homeowner sells the house within 15 years, the remaining credit would be due at closing from the profit of the sale.

• If there is insufficient profit from the sale, the remaining credit payback would be forgiven.

So, if you're still on-the-fence about buying, we say stop riding the rails and let's go shopping before all the good stuff is picked over.

-MDS