Who Else Wants $8,000 to Buy a New Home?
As part of last year’s Housing & Economic Recovery Act, Congress created a $7,500 First-Time Homebuyer** Income Tax Credit. It went into effect April 8, 2008 and was set to expire July 1, 2009. (For more, check out my October Real Estate Break video newsletter @ http://www.youtube.com/watch?v=8Y33jlKZW50) It’s primary goal was to remove some of the excess housing inventory in order to stabilize the real estate m
arket. Seeing as 1st time homebuyers make up over 40% of all home purchases, this seemed like a plan that was too good to fail.
However, one of the criticisms of the original “tax credit” was that a homebuyer who received it had to repay the IRS over a period of 15 years, effectively making it nothing more than an interest free loan. The last entity that most people want to owe money to is the Federal Government, and so very few people were taking advantage of the credit. And so, as is the case with most government programs and ideas, they needed a couple of attempts to get it right. Thus the 2nd phase of stimulus was born, affectionately referred to as the “American Recovery & Reinvestment Act.”
The new & improved 1st Time Homebuyer tax credit became effective on January 1st, 2009 and extended the credit to include purchases made prior to December 1st, 2009. The other improvements to the plan include:
-
The buyer no longer must repay the credit, as long as the home is not sold within 36 months of purchase.
-
The tax credit maximum has been raised from $7,500 to $8,000 (or 10% of the home’s purchase price, whichever is less)
-
Purchasers can now use state/local revenue bond financing along with the credit.
For a more complete overview of the 1st time homebuyer tax credit, the American Recovery & Reinvestment Act, and how they can both be used by investors to sell homes faster, check out the audio recordings section of our website (You must be a member to access this area of the site).
See you at next month’s meeting,
Matt & Woody
**A “First-Time Homebuyer” is defined as an individual who has not had an ownership interest in any property in the past 3 years.
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
I love the idea of getting $8K, the $7.5 loan was cool… but free money is even better.
[...] Who Else Wants $8000 to Buy a New Home? [...]