Shayn Carlson Mortgage Planner 208.947.5555
Tax Credit for Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Tax Credit versus Tax Deduction
It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.
Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!
Phaseout Examples
According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.
Homes that Qualify
The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify.
The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future.
As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.
brought to you by Idaho Housing and Finance Association, has always offered extremely low mortgage interest rates. Now, we’re offering even more… Down payment assistance.
Eligible borrowers may qualify for one of two Down payment Assistance programs available. Borrowers must meet certain eligibility requirements in order to qualify for funding down payment or closing costs assistance.
Please review the following Down Payment Assistance Programs available. If you have any questions please contact your local lender who can provide you with additional information about the programs.
NOTICE: Due to the overwhelming volume of reservation requests and applications for Idaho Housing and Finance Association’s HOME Down Payment & Closing Cost Assistance Program, we have expended all currently available funding for this activity.
Effective January 1, 2009, IHFA has temporarily suspended Down Payment and Closing Cost Assistance reservations or applications.
Please note that this does not apply to IHFA’s Good Credit Rewards program.
Good Credit Rewards Down Payment and Closing Costs Assistance
This down payment assistance program offers a second mortgage for up to 3.5% of the first mortgage that can be used for down payment and closing costs. The second mortgages are fixed rates over 30-years making the monthly payment very low so as a borrower you can easily qualify for the loan amount you need. Also this program allows you to keep your savings, which might help you if you have unexpected expenses after you move into your new home. To learn more about this program click below:
HOME Down Payment Assistance Program
Home down payment and closing cost assistance are for first-time homebuyers in the form of deferred payment at 0% interest that are forgivable over time to a person at less than 80% of the area median family income. This program is a nice way for qualified buyers to have assistance for their closing costs without repayment when living in the property for more than 10 years. To learn more about these programs click below.
HOME Down Payment Assistance Program Click Here
- Assistance to the borrowers, based on need, can range from $1,000 to $20,000
