Everything You Need to Know About the $8000.00 Housing Credit!

• Financial Planning

That's right, $8000.00 bucks for buying a home! Why? Because, the Government loves to give out grants and stimulus when the economy is doing poorly, and this will be a real shot in arm for a lot of people and the economy.  A strong Real Estate market would help the economy a lot right now and the Government wants people to buy homes. 

This is not the first time that Government has stepped up and did such a thing. The Government really wants those people that have been on the fence about buying a home to do go ahead and buy.  If you have been considering buying a home the $8000.00 can come in pretty handy in taking the plunge.

Be careful because Real Estate prices in some parts of the countries are still falling, and there could be an even better deal next year. In fact this has happened already, in 2008 they gave out a $7500.00 tax free loan and then 2009 they upped it too $8000.00 bucks which does not have to be paid back. The Senate had initially felt that this rebate should be $15000.00, but they settled on $8000.00.   

If you bought a home in 2007, make certain that you take advantage of that interest free loan, and file an amended tax return.

Here are the 9 most frequently asked questions we have received at myWealth:

Who qualifies?

You must be a first-time home buyer purchasing a primary residence. The home purchase must occur on or after January 1, 2009 and before December 1, 2009.  The homes purchase date is the date is when closing occurs and the title to the property is transferred to the home owner.

Does everyone qualify?

Not everyone, but almost everyone! If you are single and making less than $75,000.00 a year or married filing jointly making less than $150,000.00.   If you are close to these amounts you may still qualify for the full credit or a partial credit. Seeking a tax advisor may be very worthwhile here.

Is it really $8000.00?

It can be less, but most people will qualify for the full $8000.00 If you buy a home for less than $80.000.00 it would be reduced since it is the greater of $8000.00 or 10% of the purchase price.

How do I claim the Credit?

You claim the credit on your tax return, in which you fill out Form 5405. If you bought a home recently, or are considering buying a home you may want to seek a tax advisor/preparer to make certain you are taking full advantage of this credit.

There are different ways to actually start receiving the monetary benefit of this credit. Such as filing an amended return, or just decreasing you withholding on your paycheck.

Can I get it the $8000.00 credit as a down payment?  

This is possible. HUD (Housing and Urban Development) has approved the way for you to apply this anticipated credit to the home purchase rather than waiting until you file your tax return. FHA approved lenders, will be able to provide a short term loan of up to $8000.00.  

Do all homes qualify?

Pretty much, even Mobile Homes and House Boats qualify as long as they are first time home purchases. Vacation homes and Investment properties do not qualify. It must be your primary residence.

I haven't owned a home in 5 years would I be considered a first time home buyer?

As long as you and your spouse have not owned a home in the last 3 years you will qualify as a first time home buyer. If you purchase a home with a brother, sister, parent or friend, you may qualify while your buying partner does not. Assuming they own, or have owned in the last 3 years.

I do not itemize my return can I still get the credit?

You do not even need to itemize, in fact you do not even need to owe taxes. This is a refundable credit in which you can owe zero taxes and still get the $8000.00. A non-refundable credit requires tax to be owed in order to receive a monetary benefit. A refundable credit is better than a non-refundable credit, and much better than a deduction.

What's the Catch?

The catch is that in the long run this $8000.00 dollars upfront may not be worth your while. Everyone knows that the Real Estate market has fallen off a cliff in the last couple of years and interest rates are starting to surge which could further depress this market.

Anders Geersten Ph.D one of our contributing writers at myWealth has a very gloomy outlook on Real Estate.

Homeownership should be the goal for most people, but like anything you need to crawl before you walk.   A home comes with a lot of expenses, and sometimes people get in over their head, and the financial security in which they seek backfires on them.   Make sure you recognize the mistakes that many people have made in the past, and be certain you are ready for homeownership.

For more information go to: IRS Q&A and the IRS scenario page.