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First time homebuyers tax credit

It's until July 1, 2009.

I think if we can get the tax credit we may look before that, it all depends on a few things going on... so we might miss out too.

My FFIL is so wishy-washy... so I don't depend on his plans anymore, but our plan is to look a year from now.

Read #16

Does the credit have to be paid back to the government? If so, what are the payback provisions?
Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.

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Posted by stinenandy2010

FYI - Do not take this tax credit. You have to pay back the $7500 over the course of some number of years. I've throughly looked into it being an accountant and even had my cpa confirm. Its more like a loan without interest for your tax return but then you have to pay it back so there's no point.

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Yes this is true but if you need the money it is good to have the $500 every year taking out of your return.

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Posted by stinenandy2010

Read #16

Does the credit have to be paid back to the government? If so, what are the payback provisions?
Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.

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thanks for clarification...i was all annoyed that I dont qualify...now I feel better :)

I know it has to be paid back...but essentially it is a $7,500 interest-free loan. Plus if you sell the property and don't make a profit, the remainder of the loan is completely forgiven.

FWIW, I think this can be a good idea if you need the money. For example, we want to redo our bathroom--and instead of dipping into our wedding fund, I'll be able to finance it for $500/year over 15 years. Then, if we sell in a few years and don't make a profit--which is very possible since we bought when prices were high--we got a free $7500.

Unless I'm looking at this the wrong way? But I think in some cases, this could be a great idea.

Personally, I would not do it. Clearly over the next 15 years, your house is going to appreciate so there is no way you are going to get around not paying this back unless the world comes to an end. Plus, your accountant is responsible for taking care of this - what if you change accountants in the next 15years which is a good possibility, and they don't do it, then you are really screwed. Also, what if next year you don't have an extra $500 to pay back next year???

Maybe because I am an accountant, I see all the things that go wrong with these types of tax credits, I just strongly advise against it.

If you are serious about buying a home, I would suggest taking about an extra $7500 on your mortgage if you desperately need it. Its like an extra $20 in your monthly payment, yea you paying interest, but I think its a better case than the tax credit.

Sorry I guess this is just the finance in me talking.