Another Look at the Recovery Tax Credit

We get questions about the $8000 tax credit all the time.  Here is a very brief summary on how it works:

• The law allows a tax credit up to $8000 for a qualified first time home buyer.  You are a “first time” home buyer if you haven’t owned your own home in three years.  You must be buying a home that you plan to live in as your primary residence.
• Any home that can be used as a primary residence will qualify for the tax credit.  So you could buy a “stick built” house, a manufactured home, or a modular home.  I’ve even heard that you could buy a “park model” home, if you plan to live in it, and get the tax credit.  You would want to check that one out. 
• The tax credit is refundable.  This means you can claim the credit even if you have little or no federal income tax liability to offset.  A tax credit is a dollar-for-dollar reduction in what the taxpayer owes on taxes. 
• Since this is a “credit” you don’t have to repay it.  (Unlike the $7500 the interest-free loan of the previous bill).
• There are income limits.  If you are single the limit is $75,000; married it is $150,000.  If you make over these amounts the credit is reduced proportionally.  You have to talk with a professional tax consultant for a fuller explanation of all parts of this tax credit.  What I am giving you is a brief summary.
• You claim the tax credit on your federal income tax return.
• “Nonresident aliens” (an IRS definition) can also claim the tax credit as long as you meet the income limits, etc.
• You can treat your 2009 home purchases as if you bought the home in December of 2008.  In other words, you can claim the credit sooner by using your tax filing for 2008.  Talk to your tax preparer to find out how this works. 

 Disclaimer:  Although I believe the above is accurate information, it is your responsibility to verify your eligibility, and the terms and details of the Housing Tax Credit.   

Other news:  Right now, if you plan to rebuild, put on an addition, or remodel your home in the city of Shelton you are required to put in sidewalks, curbs and gutters along the street at the same time.  The added costs of doing these required projects have generated a lot of complaints from people.  The Shelton City Commission is considering what to do about the complaints, and there is a possibility that the language will change so that ordinary citizens who simply want to do a simple remodel will be able to do so without having to put in the sidewalks, etc.  We are watching to see the outcome of the Commissions deliberations. 

While the jobless rates in Washington State are not any worse than they were last month, they are not any better, either.  I have a friend who has been applying for one job after another for over a year now, and is still looking, so this situation hits home with me.  Also, any of us in the real estate profession know that if people are worrying about their jobs, they are not out buying houses!  We are looking toward the day when people start going back to work again, instead of hearing of more people losing jobs.

Tags: first time buyers, news, tax credit