St. Paul Real Estate: First-time Homebuyer Tax Credit

Housing and Economic Recovery Act of 2008
Amount of Credit
Ten percent of cost of home, not to exceed
$7500
Eligible Property
Any single‐family residence (including condos, co‐ops) that will be used as a principal residence.
Refundable
Yes. Reduces income tax liability for the year of purchase. Claimed on tax return for that tax year.
Income Limit
Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000, respectively).
First‐time Homebuyer Only
Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
Recapture
Yes. Portion (6.67 % of credit) to be repaid each year for 15 years. If home sold before 15 years, then remainder of credit recaptured on sale.
Impact on District of Columbia Homebuyer Credit
DC credit not available if purchaser uses this credit.
Effective Date
Purchases on or after April 9, 2008
Termination
July 1, 2009
Interaction with Alternative Minimum Tax
Can be used against AMT, so credit will not throw individual into AMT

Foe the details on the tax credit please visit the IRS web site

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Comments

Jim Johnson CRS said at August 09, 2008 at 10:43 PM

I enjoy following your blog! The Bend Oregon real estate market continues to slow. It looks like a good time to buy in your market.
Aaron Dickinson - Edina Realty said at August 10, 2008 at 01:05 AM

Nice that Jim Johnson CRS decided to stop by and spam.

This whole first time buyer "tax credit" deal is a bunch of crap. It isn't a "tax credit," it is a "no-interest loan repayable over 15 years."

The buyer doesn't get it till tax time, and they have to repay it anyway, so while I was excited when I first heard, once I read the rest of the story I was quite frustrated at our representatives' decision. The idea is great, but stop trying to sell us on something it isn't.

I've always known a "tax credit" to be free money... now it is simply "credit" like everything else. Will the IRS put you in jail if you fail to pay them? We may be close to bringing back debtor's prision if we decide we're going to give loans for everything.
Teresa Boardman said at August 10, 2008 at 05:35 AM

Aaron - I agree, about the comment spam and the tax credit. I am waiting for the hype and advertising to get started. The radio ads etc. telling people to buy homes.
John Carr said at August 10, 2008 at 02:43 PM

I liked your previous blog a lot. I like your "new and improved version" even better. Jim Cronin - at the Real Estate Tomato - and his group are a great bunch of guys. I have recently moved our blog to their platform and I am looking forward to building a great Toronto blog with their help.
Wishing you continued success!
Teresa Boardman said at August 10, 2008 at 03:01 PM

Same blog as I had before, still on the typad platform, Jim redesigned it for me.
Jonathan Blackwell said at August 10, 2008 at 10:30 PM

Smoke and mirrors mostly, although it will help some people cover some of the initial expenses associated with buying a home

Jonathan Blackwell

http://www.GoGreenWithFHA.com
James Wheelock said at August 10, 2008 at 11:09 PM

I am going to have to disagree with the tax credit being nothing more than smoke and mirrors. I realize that many people do not understand the time value of money. The time value of money concept is the fact that 7500 today is worth considerably more than the value of 7500 next year. If you take the time to do a IRR calculations it becomes equivalent to the buyer recieving 2257 dollars at the time of the credit. The above figure comes from doing a NPV calculation using a discount rate equal to the average inflation rate over the last 30 years. Furthermore having the tax credit of 7500 up front will allow the buyer to put money back into the economy either by investing the funds or through purchases made to cover repairs on foreclosures.

These basic financial facts show me that this has an excellent potential to provide value to the consumer and possible work as a ecomomic stimulus.
Dan Hart said at August 17, 2008 at 11:18 AM

So how do you get the money, does it just come in your refund check? I'm in the process of buying my first home
Teresa Boardman said at August 18, 2008 at 06:07 AM

Dan - I can't give tax advice of any kind. My understanding is that the tax credit reduces how much you owe the IRS the year you buy the home. Kind of like when you have a Dependant, you subtract X amount from your taxable income. In this case they make you pay it back 6.67% at a time. None of us are really sure how much this helps.
said at September 30, 2008 at 04:19 PM

Is there any calculation of how much tax break we will get if more that 150 and less than 175.
Thanks.
Teresa Boardman said at September 30, 2008 at 04:32 PM

Here is how you calculate your tax credit:
A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the full credit will be available for homes costing $75,000 or more. Whatever the size of the credit a taxpayer receives, the credit must be repaid over a 15-year period.

Here is a link to the IRS web site: http://www.irs.gov/newsroom/article/0,,id=186831,00.html

By MN law I am prohibited from giving tax advice of any kind.