What is a potential home buyer to do? There is widespread negative publicity about the future of real estate values. There is negativeity regarding the difficulty in securring mortgage financing, home foreclosures and the collapse of financial institutions. They are experiencing an huge drop in the value of their investment portfolios. They have concern with the security of their job. Can you blame buyers for not rushing into a long term financial commitment, such as purchasing a home?
but,……. there are buyers setting appointments daily to see homes. There are buyers where buying a home is a necessity, or is more preferred than continuing to rent with no tax deduction. While total sale transactions may be down in many real estate markets, home purchases and real estate closings continue.
So why isn’t there more excitement and more publicity in the Realtor community with the $7,500 First-Time Buyer IRS Tax Credit included in the Housing and Recovery Act of 2008?
Throughout 2008, Realtors have tirelessly promoted the benefits of purchasing a home in the current real estate market (favorable mortgage interest rates, lower real estate values, available listing inventory, etc). There is not much more effort in promoting the benefits a tax credit like this can be to first-time buyers. Combined with lower interest rates, a huge selection of the many homes for sale and more affordable home prices than ever, this tax credit may be just the thing many first time buyers need to move forward and make a commitment to purchase a home now, rather than just look at homes and wait for a better time to buy.
The $7,500 First-Time Buyer IRS Tax Credit applies to first-time buyer home purchases of a principle residence between April 9, 2008 and July 1, 2009. It is a tax credit and not a tax deduction. A tax credit is a reduction in income taxes owed! In other words, when a buyer files their income taxes for the year the home was purchased (2008 or 2009), they may be able to subtract $7,500 from the amount of federal income tax liability, which will either increase their tax refund or reduce the amount of tax still owed.
However, this tax credit is not free. It has to be paid back. Repayment begins two years after the credit is claimed, and must be repaid within 15 years. That’s $500 per year. Yes, it would have been much better if there was no repayment provision, but an interest-free loan for 15 years is not such a bad thing, is it? That’s right; there is no interest on the tax credit received.
