The United States Senate decided to offer a $15,000 tax credit, also known as the new home buyer tax credit, to qualifying homebuyers. Read on to learn what you need to do to earn this $15,000 tax break and why you might want to think twice before claiming it.
Why is there a New Home Buyer Tax Credit?
To say that the housing market is still in somewhat of a freefall would be putting it kindly. With states losing property tax revenues in the wake of foreclosures, the new home buyer tax credit sounds like the perfect $15,000 tax break incentive to get those on the fence — with the savings and with the credit score — to dip their big toes into the freezing waters of the housing market and buy a primary residence.
I Want the $15,000 Tax Credit! What Do I Need To Do To Qualify For The New Home Buyer Tax Credit?
The Associated Press reports that the $15,000 tax credit can be yours, if you buy a newly built – or already existing – home. The $15,000 tax break is actually the maximum dollar figure of the new home buyer tax credit for which you can qualify. In effect, the proposed tax credit would allow homebuyers to claim up to 10% or $15,000 (whichever is less) on their tax return.
How is the $15,000 new?
You may be aware that federal law already offers a $7,500 tax credit for homebuyers. A quick look at the IRS’ rules on the current version of the new home buyer tax credit reveals that it is only open to first time homebuyers who have not owned a home between 07-02-05 and 07-01-08, but purchased a primary residence between 04-08-08 and 07-01-09. Yes, the dates overlap.
Assuming the $15,000 tax break is approved, it will do away with the first-time homebuyer stipulation, the Atlanta Journal Constitution reports, allowing anyone who purchases a primary residence to claim the tax credit.
Let the Homebuyer Beware: $15,000 Tax Credit might need to be repaid
If the new home buyer tax credit really does take the place of the old $7,500 credit, its stipulations might still carry over. A closer perusal of IRS Form 5405 reveals that the first-time homebuyer credit must be repaid to the federal government, beginning in 2010, in 15 installments, each of which equals $500 in an additional tax liability per year.
Moreover, if you vacate your home as your primary residence at any time during this 15 year period, you are required to pay up the remaining installments in that tax year. This begs the question if the new and improved tax credit is a means of owing more money to Uncle Sam – after all, who (at least in sunny Southern Cal) remains in their home for 15 years?
http://www.google.com/hostednews/ap/article/ALeqM5gdDrWnoMueqVFI-Uo1ClxVZur22AD9652S581; http://www.irs.gov/newsroom/article/0,,id=187935,00.html; http://www.irs.gov/pub/irs-pdf/f5405.pdf; http://www.ajc.com/metro/content/metro/stories/2009/02/05/isakson_stimulus_homebuyer.html