First Time Homebuyer Credit
Posted: 9/1/2008
Taxpayers can now qualify for a $7,500 refundable credit when they purchase their first home. The credit is calculated at 10% of the purchase price of the home to a maximum of $7,500
Qualifications:
1. The home must be located in the United States and be the primary residence.
2. The home must be purchased between April 9, 2008 and June 30, 2009.
3. You must be a first time homebuyer or not owned a home for three years.
4. If you sell the home or it ceases to be your primary residence before the end of the fifteen year period you must pay back the full amount to the government if sold at a gain. If sold at a loss you do not need to pay the credit back.
5. You cannot purchase the home from certain related persons.
Important Note: The taxpayer is required to pay back the credit over a 15 year period. If the taxpayer receives $7,500 he or she will pay $500 a year with his or her tax return to pay back the credit.
Good news: No interest is due with these payments. What does this mean? This is an interest free loan.
Savings Opportunity
This unique situation presents a savings opportunity for taxpayers who can use interest free debt to reduce interest bearing debt.
“Show Me The Money!”—An example
If a taxpayer borrows $100,000 from the bank and he or she takes the $7,500 to reduce the principle owed, the amount of interest saved is significant. Assuming a 6% mortgage rate on the $100,000 and the $7,500 is paid down on the principle within 1 year of the start of the loan, the taxpayer could save approximately 29,000 in interest and reduce the life of their loan by 5 years.
Each financial and tax situation is unique and deserves individual attention. Please call us to discuss this opportunity.
Please contact us and we will be happy to meet with you.