First Time Homebuyer Help!!!
While not a question from my readers, I thought it would good to go over something new that will help first-time home buyers. For those who purchase a home between April 8, 2008 and July 1, 2009 and who did not own another primary home for three years prior to the purchase that falls into that time frame, you are eligible for an interest free loan from the government!
Here’s how it works. You get a credit of the greater of $7,500 or 10% of the purchase price of your home on your 2008 or 2009 tax return. There are income limits that are in place if you make too much money. Make sure you check with your tax preparer or CPA to see if you qualify. There are other gotchas relating to repayment of the credit in the case of death, divorce or sale of the home prior to finishing repayment.
The best part is that you don’t need to begin paying off the loan until the 2nd year after you take the credit. This means that those who claim in on their 2008 tax return will begin paying it back on the 2010 tax return filed in 2011. The repayment terms are 15 years meaning $500 per year for 15 years. While this is intended to help first-time home buys make repairs and additions to the home as needed without going into the financial hole, it is also has financial planning strategies.
Why not get the money on this year’s tax return and invest the principal in a cd or other very safe investment. The $500 of repayment will be on your tax return. If you have managed your withholding correctly, this will not require a $500 extra payment at tax time. It simply will come out of your refund or require that you pay a little extra. So, you get the money interest free and can earn money on the principal. If you do need to tap the money to fix a roof or do some major repair, you will have it available and don’t have to simply put off the repair jeopardizing the quality of your home. This IRS article goes into a little bit more detail about how this works.
