First time home buyer tax credit upto $7,500

First-time home buyers are now eligible for a tax credit of up to $7,500 under the U.S. Housing and Economic Recover Act of 2008.

To qualify for the tax credit, purchasers must close on a home between 09th April 2008 and 01st July 2009. Married couples / Singles with incomes up to $150,000 / $75,000 respectively qualify for the full tax credit. Taxpayers with higher incomes may be eligible for a partial tax credit. If you purchased your house in 2009, you might be eligible for $8,000 non refundable tax credit. Click here to see if you qualify.

The tax credit is equal to 10% of the home’s purchase price, but is capped at $7500:

* If you purchase a home worth $70,000, you qualify for a $7000 tax credit.
* If you purchase a home worth $80,000 or more, you qualify for a $7500 tax credit.

This tax credit isn’t really a tax credit. It’s an interest-free loan from the U.S. government. Taxpayer who got this credit, will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale.

For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The tax payer does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed.

If the home owner sell the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.

Manen Kothari