- The tax credit is available for first-time home buyers, which includes people who have not owned a home that is their primary residence for at least three years.
- The credit depends on how much money the home buyer makes. To receive the full tax credit amount of $7,500, the income limits are $75,000 a year for single taxpayers and $150,000 for married taxpayers filing joint returns. For partial credit the upper limit is $95,000 and $170,000 respectively.
- The home purchase must occur on or after April 9, 2008 and before July 1, 2009.
- Qualified home buyers claim the credit when they file their income tax return. The credit is refundable, which means if their tax liability is less than the credit, they will get a check from the IRS for the difference.
- The tax credit works as an interest free loan with up to 15 years to pay it back. For example, a home buyer claiming the full $7,500 credit would repay the loan at a rate of about $500 a year.
Homeownership has always been the cornerstone of the American dream, and it remains the best way for an individual or family to build wealth over the long term, even in the current housing market downturn.
Like other investments, housing is subject to cycles. But over the long-term, real estate has consistently appreciated, even through periodic adjustments in local markets in response to economic conditions. On a national level, home appreciation has historically increased four to five percent annually, according to NAHB economists.
Homeownership provides financial advantages other investments. These include tax benefits such as deductions for mortgage interest and real estate taxes, and the capital gain exclusion for principal residences. There is also the power of leveraging – a small downpayment will help increase a home owner’s overall net wealth as the home’s value increases over time. Finally, rent payments may increase over the years, but a fixed-rate mortgage won’t.
The new legislation combined with current market conditions gives home buyers the opportunity of a lifetime. Interest rates are still at near-historic lows, and due to the housing downturn, there is a large selection of homes on the market to choose from, and prices are more competitive than they have been in years.
