Have you heard about the new housing rescue bill that passed in July? One of the most exciting new provisions of the Housing and Economic Recovery Act of 2008 is the First-Time Home Buyer Tax Credit. The credit is designed to encourage first-time home buyers to go ahead and make the leap to purchase their first homes.

First Time Home Buyer Tax Credit Rules:

• The home must be purchased as a primary residence.
• You must not have owned a primary residence in the last three years. For couples, both individuals must not have owned a primary residence in the last three years.
• Must not be a non-resident alien as defined by the IRS in Publication 519.
• Individuals must have a modified adjusted gross income of less than $75,000 annually and couples less than $150,000 to qualify for the full amount.
• The home must be closed between April 9th, 2008 and July 1st, 2009.

How the tax credit works:

• The tax credit is 10% of the home’s sale price with a maximum of $7,500.
• You can claim the credit on taxes filed in 2008 or 2009.
• It’s a credit and not a deduction.
• It’s refundable, so if your tax liability is less than the credit, you can get the money back.

Tax Credit Loan Repayment Terms

The tax credit isn’t really a tax credit, it’s really just an interest free loan with some qualifications. You have to start paying back this loan within two years and you make equal payments over 15 years. When you sell your home, any profits will go first into paying off that loan. If you sell at a loss, the difference will be forgiven.

This tax credit (loan) along with the low prices and low fixed-rate loans make now the ultimate time to purchase your first home. For more information please call me at (801) 787-7797 or email me at khayyam@khayyamjones.com.