Saturday, August 9, 2008

$7500 First Time Home Buyers Tax Credit

Newsflash! With the new housing bill signed into law, there is now a $7500 tax credit available for first time home buyers. But like so many of the good things in life, time is of the essence for buyers who want to take advantage of this outstanding opportunity. Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible.

Now, let's think about coupling that with the City of Stillwater's $5000 Homebuyer's Assistance program and you are talking about some serious cash.

The $7500 first time home buyers credit is a tax credit and is refundable which means that the home buyer 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 all of the amount of the refundable tax credit. This tax credit is considered a loan and will have to be paid back. 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.

The city of Stillwater's $5000 assistance program is a loan program that provides a $5000 loan for qualifying applicants that is paid back if the home is sold within 5 years. The loan is forgivable, meaning you don't have to pay it back if you hold the home more than 5 years and is prorated for the 5 year holding period. So if you sold the house in year 4 you would only be required to pay back 20% to release the mortgage.

For more information on the Federal $7500 first time homebuyers tax credit go to:
For more information about the City of Stillwater Homebuyer Assistance program go to:

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