I always share as I write that I am not an expert and I do not even play one on TV so I want to make some of last weeks article a little more clear if I can. As my husband says, “lets see if we can make this as clear as mud” There is still confusion surrounding the tax Credit with the emphasis on CREDIT and not deduction. Please take my limited knowledge and run straight to your banker and your favorite Realtor and see what you can come up with. I have borrowed some examples that may apply to you and have consulted again with my banker friends that are wiser than me.
- A refundable credit means that if you pay less than $8,000 in federal income taxes, then the government will write you a check for the difference
- In the case that you owe $4,000 in income taxes at the end of the year you would pay nothing to the IRS and and receive a $4,000 payment from the government.
- If you are due to receive a $1,000 tax refund from the government, your refund would grow to a whopping $9,000. ($1,000 plus $8,000 from the home buyer tax credit)
- If your final tax liability is $6,000, but you’ve underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
This is short and sweet this week so you will have time to run on down and get all your ducks in a row so you can get that house. I like to think of this as a little house warming present. Some of my buyers are looking at it as a discount so to speak on their home and with money being tight that is a welcome and one more reason to purchase their first home. I will leave you with some resources that may help you clear up the process and navigate you to a successful purchase.
First-Time Home Buyer Tax Credit information from the IRS.
State Housing Agencies with programs that provide short-term loans that may be used to fund a downpayment in conjunction with the tax credit.
Buying and Owning a Home Freddie Mac
Buying a Home Department of Housing and Urban Development
Buying and Owning a Home Freddie Mac
Buying a Home Department of Housing and Urban Development
The Home Buying Process Federal Housing Administration
FHA Loans Federal Housing Administration
Homeownership Resources Fannie Mae
NOTE: Please know that much of this knowledge is general in nature and your local lender will let you know what is available in your location.
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Great information Karen. There are still a lot of people out there that do not even know that this is available! Buyers need to get going about this though as the home needs to close no later than Nov 30th. The Florida Assn of Realtors website also has some excellent information on this program.
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This is good Karen. It’s a shame more tax preparers don’t get excited about the home buyer credit and educate their clients with a simple letter.
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Good basic info, Karen. It is true that the credit runs out this year and buyers need to close by November 30. Also, I believe Florida is one of the states that may have made some arrangements (developed a plan) with lending institutions to allow buyers to obtain the $8,000 up front to use for closing costs. I don’t know the specifics on this, but I’m sure they’re available through the Florida Association of Realtors as well as state government sources.
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