Fletcher Realty: Housing and Economic Recovery Act

The Housing and Economic Recovery Act of 2008 awards a tax credit up to $7500 on 2008 tax returns for qualifying first time home buyers.

What is it? How does it work?

This is a tax CREDIT, and not a tax DEDUCTION. It is a true dollar for dollar reduction on taxes owed. It is not issued at the time of purchase - so you still need a down payment.
The credit can result in a true tax REFUND! If, for example, you were to get back zero on your 2008 taxes and you qualify for the full $7500 credit, you would then receive a tax refund for $7500.
The tax credit is essentially an interest-free loan. You will repay the credit to the government $500 per year over 15 years or when the house is sold.
If the profit you receive when selling your home is less than the remaining amount you owe, the discrepancy will be forgiven. For example, if $5000 was still owed and the sale of the home only generated $4000 profit, then the remaining $1000 shortfall would be forgiven and you would not have to repay the government.
If you take the credit in 2008, the first $500 payment would need to be made when you file your 2010 tax return.

Do You Qualify?

You must not have had ownership in a primary residence in the past three years.
You must purchase a home between April 9, 2008 and July 1, 2009.
Single taxpayers with an Adjusted Gross Income (AGI) up to $75,000 and married taxpayers with a joint AGI of up to $150,000 are eligible for the full $7500 credit. A lesser tax credit is still available if your income is above these amounts.

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