Buy a House. . .Collect $8000 Bucks!

First time home buyers are facing a fabulous opportunity thanks to the American Recovery and Reinvestment Act of 2009.  A key component of this new legislation is a tax credit available to first time buyers.  For those of you unfamiliar with the credit, individuals who have not owned a primary residence in the last three years may be eligible to receive a dollar for dollar income tax credit of 10% of the purchase price of a home up to $8000.  This credit may be claimed in full by individuals whose modified adjusted gross income is $75,000 or less, for married couples filing jointly the income limit is $150,000.  For individuals over these income limits, the tax credit is reduced.

This credit applies to purchases on or after January 1, 2009 and before December 1, 2009 and never has to be repaid. If the home is sold in the first three years after it is purchased the entire credit is recaptured on the sale, but if the buyers live in the home for three years, there is no recapture.  In essence, this is free money available to first time home buyers who are purchasing a home and intend to live there longer than three years.

What many do not know or understand is that the $8000 first time home buyers tax credit can be claimed on 2008 tax returns.  The law allows for qualified home purchases made in 2009 to be treated as if the purchase occurred on December 31, 2008.  Even if the purchaser has already filed his or her 2008 tax return, an amended return can be filed to IMMEDIATELY claim the $8000 credit.

This is a true tax credit, a dollar for dollar reduction in what the taxpayer owes. For example, if you owe $1000 and claim the $8000 credit, you would receive a nice fat check for $7000 as a tax refund.  A qualified tax professional can assist in filing the proper forms to ensure full credit.

First time homebuyers have a unique opportunity.  This newly enacted tax credit, coupled with historically low interest rates and moderately priced housing inventory, has created a great buying opportunity for those who are willing to act quickly.