Sunday, February 22, 2009

$8000 Tax Credit Simplified

If you were or are confused about the $8000 tax credit you're not alone. Hopefully I can clear some things up for those of you who are looking at the possibility of choosing this as an option.

First, the original tax credit was $7500 for first time homebuyers but it was more like an interest free loan. The government basically was loaning this money but it would have to be paid back over the next 15 years every time you filed your taxes ($500 a year). The House and Senate differed over what this tax credit would be, the House said $7500 and the Senate wanted $15,000 (there were more details than that). The final plan signed by President Obama would in effect give a first time homebuyer a $8000 true tax credit that would not have to be repaid. Here are the simplified details:

- $8000 tax credit for first time homebuyers
- A first time homebuyer is anyone that has not owned a home for the last three years
- This credit would be 10% of the purchase price of the house up to a maximum of $8000
- Only available to individuals with incomes up to $75,000 or married couples with incomes up
to $150,000.
- Only for the purchase of a home from Jan. 1, 2009 to Nov. 30, 2009
- It is based on your tax liability * See examples below
- Cannot be used as a downpayment because you have to purchase the home then file your
taxes to get it
- You can file an amended return to get this credit if you've already filed your taxes for 2008
- You must live in the house for three years or you'll have to pay back the credit

Tax Scenario #1: Your federal withhold is $4500 and at the end of the year when you file your taxes you owe nothing and are not getting a refund. You will then be able to claim the entire $8000.

Tax Scenario #2: After filing your taxes you've discovered that you would be getting a $2000 refund. Your final credit would then be $10,000.

Tax Scenario #3: You've finished figuring your taxes and you discover that you owe $1500 to the federal government. Your credit would then be reduced by what you owe and you then would get a $6500 credit.

Now the question might be how can I claim this? My suggestion as always, when dealing with taxes and the federal government, would be to consult your tax professional. You can find more information using the following link

If I can be of any help finding that first home for you so you can take advantage of this credit please give me a call (937) 423-3316 or email me at and I will do my best. Any questions or comments I'd love to hear them, just comment below.

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