I showed a house recently and was explaining the tax credit plan to the potential buyers when I realized that they had no idea that this plan even existed. Thru the power of social networking on the internet, I've made a couple of notes about it but I still don't think people really understand what this is all about. This is a great program for new homebuyers as well as previous homebuyers.
The hangup that I've noticed so far is the fact that this is a tax CREDIT and not a deduction. What does that mean? Keep in mind that I am a Realtor and not a CPA, so bear with me on this.
Let's say you make $50,000 and have $10,000 in taxes deducted from your paycheck by your employer. If you have a tax deduction, that comes off your taxable income. For example, if you had a deduction of $1000, your taxable income would be $49,000 and the amount of taxes you owe would decrease slightly.
However...and that's a BIG 'however'...The Federal Housing Tax Credit is not a deduction. It's a full tax credit from the amount of taxes you owe. In this situation, if you qualify as a new homebuyer you would get an $8000 tax CREDIT, meaning your tax liability goes from $10,000 to $2,000. That's really an incredible thing. Unless you did your W-4 incorrectly, you would probably get a bulk of that money back.
The tax credit isn't just for new homebuyers, though. If you have owned a house (and lived in it) for five of the last eight years, then you qualify for a $6,500 tax credit. Again, that comes off the amount of taxes you owe.
Don't believe me? Read it for yourself.
If you are looking at buying a new house, this is a great program to take advantage of, however it only lasts thru April 2010.
M
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1 comment:
Awesome to know! This is a huge benefit! All who can take advantage of this should while it's available.
What about lending? What has changed in the credit market for home mortgages?
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