The $8,000 Tax Credit For First Time Home Buyers

It took a while but the house finally approved the latest version of the Stimulus Plan. The only republicans to vote in favor were Senators Snow and Collins from Maine and Specter from Pennsylvania. The bill contained over 1000 pages and the house had 48 hours to read it. Almost no one who voted for the plan actually had time to read it and aren't fully aware of everything that is in it or what they ended up voting for. Rest assured there is some pork in there.

The housing crisis has been addressed, both for current owners and first time home buyers. The latest plan institutes an $8,000 tax credit for first time home buyers and we wil focus on that in this article. Here are the requirements in order to be qualified to receive the tax credit.

1. The original plan gave a maximum tax credit of $7,500 for first time home buyers. This was to be issued as a loan to be repaid at $500 per year for 15 years. There was some talk that it would be increased to $15,000 but that did not happen. The plan now includes a tax credit of 10% of the purchase price of the home. It will be capped at a maximum of $8,000. Unlike the earlier plans the $8,000 does not have to be repaid! But you cannot sell the home for a minimum of 3 years and it must be your primary residence (no investment properties). No more than 1-4 unit dwellings will qualify. If you do not keep the home for 3 years you will be required to repay the $8,000.

2. The first time home buyer is defined as someone who has not owned a principle residence within the last 3 years before the purchase date of the home. If you only owned a second or vacation home you will still be eligible.

3. The home must be purchased between 12/31/2008 and 12/01/2009. Homes bought in 2008 will no longer qualify for the $8,000 tax credit.

4. There are also income restrictions. If you are a single person your income cannot exceed $75,000 of adjusted gross income. For married couples it is increased to $150,000. You may be still eligible if your income exceeds these limits but for a lesser amount of credit. Check the bottom of your tax return for line 37 on the first page. That should indictate your adjusted gross income.

5. Homes purchased in 2009 originally received the $7,500 tax "loan". If you have already filed your tax return under that original plan which awarded $7,500 you can file an amendment and receive the balance of $500. You will not have to repay the credit.

More information and how the whole plan is going to be implemented is scheduled to be made public March 3rd.

Experts disagree whether this will in fact help re-energize the housing market(what's new there), or the economy. No one can say what the final outcome will be. It was the so-called experts who got us into this mess to begin with. We all know something has to be done. It seems more and more banks get into trouble every day and employers are still laying off workers. Let's hope and pray this is a step in the right direction.

I will address a second area of the housing plan that deals with current homeowners, both those who are behind in their mortgage payments and those that are not, in my next article