Will the current real estate market has been tough on some home sellers, it offers lots of opportunities for home buyers.  This is especially the case for first time home buyers eligible for new tax breaks.

More new legislation passed at the end of July to provide some relief for the market.  First-time home buyers who purchase a home after April 8, 2008, and before July 1, 2009, are eligible for a $7,500 tax credit (or, if the home costs less than $75,000, a credit equal to 10% of the purchase price).  This credit is meant to be temporary relief and must be paid back to the government over a period of fifteen years. 

Income Limits

"It’s the equivalent of an interest-free loan from the government," says Bob Trinz, senior tax analyst at the tax and accounting business of Thomson Reuters.

To qualify for the credit, you (and if married, your spouse) must not have owned a principal residence during the three-year period before you buy the home. In general, the credit is available in full only if your adjusted gross income doesn’t exceed $75,000 ($150,000 if you file a joint return).

The credit phases out over the $150,000 to $170,000 adjusted gross income range for joint filers ($75,000 to $95,000 for individual filers).

If you claim a $7,500 credit, you’ll have to start paying it back as an extra tax amount on your federal returns at the rate of $500 per year, beginning with the tax return for the second year after you buy the new home. That is, if you buy a home this year and claim the credit, you’ll have to start paying back the money when you file your 2010 return in 2011.

For more details and examples of how the new law works, visit the Web site of Congress’s Joint Committee on Taxation at www.jct.gov .

You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.