JACKSONVILLE, Fla. – Sept. 18, 2008 – Two big-ticket purchases are coming up for Spencer Craven and his fiancee. They’re buying a townhome and having a wedding.
Which will cost them more this year?
“Oh, I don’t know,” Craven said with a laugh. “I’ll let you know after it’s done.” He said he’s certain of one thing. The recently enacted $7,500 federal tax credit for first-time homebuyers has gone a long way toward making it possible to purchase a Pulte Homes townhome in Bartram Park and also stage a memorable wedding.
“We’re getting married in April so getting that tax credit right before our wedding was a decisive factor,” he said.
Signed into law last month by President Bush as part of a bigger housing bill, the federal tax credit is aimed at luring fence-sitting homebuyers back into the real estate market.
The law defines first-time homebuyers as those who have not owned a home used as their main residence for at least three years. The tax credit is for the purchase of either new or existing homes purchased between April 9 of this year and July 1 of next year.
The tax credit is a refund from Uncle Sam. For instance, if someone owes $2,000 in income taxes, the $7,500 tax credit would wipe out that amount and the federal government also would send out a $5,500 check. If the taxpayer owes nothing at tax time, the check would amount to $7,500.
The rub is the tax credit must be repaid over a 15-year period to the federal government. According to the National Association of Home Builders, the tax credit is best described as a zero-interest loan.
Realtors and home builders have been learning about the tax credit to answer questions from buyers.
“I think the word is actually just getting out there,” said Pete Dalton, a Realtor with Vanguard Realty Inc. GMAC in Clay County.
He said getting the tax credit will help first-time buyers make down payments without having to tap their savings.
“It gives people the confidence to buy when they have the ability to buy,” he said.
Single taxpayers can get the full tax credit if their incomes are less than $75,000. Married couples will qualify with incomes up to $150,000. The tax credit phases out for higher-earning homebuyers and goes away entirely for single taxpayers earning more than $95,000 and married couples $170,000.
Homebuyers don’t have to take any classes to qualify for the tax credit. But like any other financial obligation, homebuyers should make sure they can afford to repay the tax credit so they avoid being hit by the Internal Revenue service with penalties and interest.
Tax Credit Available For First Time Buyers