Housing Tax Credit Beckons New Buyers

By Kenneth R. HarneyWashington Post
Article Launched: 08/03/2008 01:36:37 AM PDT

WASHINGTON - Anybody who has been sitting on the sidelines hesitant to jump into real estate until conditions settle down should know these dates: April 9, 2008, through June 30, 2009.
They mark the eligibility time span to qualify for the home purchase tax credit created by the massive housing bill approved by Congress. If you have not owned a house during the past three years - or are considering buying your first home - and can go to closing before the end of next June, you may be eligible for up to a $7,500 credit against your federal taxes for 2008 or 2009 ($3,750 if you file taxes as a single person).

The new credit is expected to benefit hundreds of thousands of buyers, although Congress set no limit on how many people can qualify. Here's a quick overview.

• The basic idea: To jump-start housing sales and clear out local unsold real estate inventories, Congress is offering tax credits to pull in new purchasers. Buy any house - new, old, any location or condition, any price range within the designated time period - and the IRS will cut up to $7,500 off your tax bill for either this year or next. For example, if you're an eligible buyer of a home this year and you owe the IRS $4,000 on your total 2008 income tax bill, your $7,500 tax credit could wipe out everything you owe plus get you a $3,500 refund.

• Eligibility rules: Do you own a home now? If so, you're not eligible for the credit.

Did you sell your home more than three years ago and now rent? You are eligible. The same is true if you've never owned a home before. Close on a house before next June 30, and you can claim a credit of up to 10 percent of the purchase price of the property up to a maximum of $7,500. If your adjusted gross income exceeds $150,000 ($75,000 for singles), the credit maximum begins to phase down in increments. You cannot claim the credit if you are a non-resident alien, financed the property using a state or local housing agency tax-exempt bond mortgage, or do not plan to use the house as your principal residence.

• Payback: Unlike some past tax credit programs, this one requires beneficiaries to repay the credit over an extended period of years. Starting in the second tax year after purchase and continuing for up to 15 years, taxpayers are expected to make pro-rata repayments to the government on their federal filings. Over a 15-year payback period for the full $7,500 credit, the cost would be $500 a year. If you sell the house before the end of the repayment period, and you have no gain on the sale, you won't be expected to pay the credit back from the proceeds. If you have a net gain, the "recapture" cannot exceed the amount of your gain.

Basically, the new tax credit functions very much like an interest-free loan for up to $7,500.
Rob Dietz, an economist for the National Association of Home Builders, says the new credit not only will pull first-time buyers into the market, but also will have a powerful "multiplier effect" as thousands of sellers of these credit-assisted houses go out and purchase replacement homes for themselves.

How do you claim the credit? If you pass the eligibility tests and buy before June 30, you simply request the credit on your tax return for either 2008 or 2009, which will be modified for that purpose. Even if you purchase in 2009, you can take the credit against your 2008 taxes by filing an amended return. For more information, go to www.federalhousingtaxcredit.com.

Contact Ken Harney at kenharney@earthlink.net.

Don't Wait...BUY!

Now how did I manage to miss April? Time flies when you are having fun! Right now, the alledged recession and the housing crunch seems to be on everyone's mind. The fed's dropping the rate did not bounce in the favor of interest rates as much as lenders like myself had hoped but we are seeing some relief. Moment to moment rate updates show that we are still on that home loan percentage rate roller coaster.

My advice to you? If you are at all in a position to buy, do it. Don't walk, run to your local lender. Rates will not get lower over the next 4-6 months. In fact they may get higher. And if I am wrong? You can bet they will increase in 2009. What are my predictions? I don't think we are on our way to the 13% rates we saw in the 80's but I do think the days of the low 5%'s are a thing of the past for awhile. Never say never. Credit is an issue with many potential home buyers today.

Lending investors are not as forgiving of credit issues and sub-prime rates have been replaced with FHA programs. It is possible for a first time homebuyer to get into a property with little to no money down with a motivated seller paying closing costs, yes, even FHA. I'd be happy to explain the particulars of this program if you are interested.

Let's not forget the big picture. We are still looking at conventional rates in the low to mid 6% range. These are still great rates. Take advantage of this if you can. Yes, home values are dipping for a bit. But if you plan on making your home purchase a long term investment, you can bet that as the value has dipped that it will again rise.

If you live in the states of Oregon or Washington and I can be of any assistance to you or help you prequalify for a loan, don't hesitate to call me. 541.786.1613 or email me at CBarber@primeres.com. Good luck and it's not as bleak as it seems.