Your accountant will probably tell you if you buy a house this year, you will have a $7,500 Tax Credit coming back from Uncle Sam. While they call it a “Tax Credit” you do have to pay it back over 15 years. I call that a no interest loan.
It goes like this, you buy a house. You’d better be a high roller, because It has to cost more than $75,000. You must be a first time homebuyer (or have not owned a home for 3 years and be buying again). You must close escrow by June 30th, 2009. When you file your tax return, you will have a credit of $7,500. So that means if you are already getting a $1,000 tax return, go ahead and make that a $8,500 return.
Still with me? Let’s talk about how you pay the man back. Starting in year 3 after you buy your house you pay back 1/15th per year until you’re all paid up. That means if you have a $1,000 tax return coming, you would only get $500 back.
There are income restrictions, if you’re single you can’t make more than $75,000 per year. If you are married you can make up to $150,000. If you make more than that (lucky dog!) you still qualify for a partial credit, so talk to your mortgage banker.
Of course if you sell before you pay back the $7,500 the government is going to get their money, and there are other nuances. It’s complicated enough that you want to make sure to talk it over with a Mortgage Banker that you trust. Or your accountant.
I know people that completely lose interest in the Tax Credit once they hear they have to pay it back, but if there is a purchase you want to make or an remodel you would like to do, it’s a great way to get it done at 0% interest.
Thanks to Mortgage Banker Brian Saltvick for the detailed information.
