Let's first define "First-Time Homebuyer". Actually, let's define what the heck I'm addressing in the first place. It's the First-Time Homebuyer Tax Credit. I trust you've at least heard about it and if not... no biggie... I will give you some of the talking points and the direct address to the site momentarily.
The whole concept of "First-Time Homebuyer" can be a tad misleading for some of you. You are considered a first-time homebuyer (under this tax credit) if you have not owned another home at any point in time during the three years prior to the date of purchase.
So what is this Tax Credit all about?
- It acts like an interest free loan because it must be repaid over a 15-year time frame. If you die, don't worry about it as long as you filed your taxes individually. If you filed a joint return, it's up to wifey or hubby to pay this interest free loan. Death, like life & love, can cost money:)
- This only applies to primary residences in the United States of America. Sorry, the vacation house in Greenwich, Connecticut doesn't qualify. As far as that Villa in Italy, count that out as well. Feel free to drop me a bottle of Chianti in the mail, though. It's got to be your home... the very roof over your head. On a personal note, I do believe we'd be better off if when buying a home... we'd consider it more than an "investment". It's where you live folks! Investments, for most of us, happen over time. I ain't (love that word) no day trader or speculator. And I never will be.
- What's the time frame? You buy the home after April 8th, 2008 and before July 1st, 2009. Let's face it, we have low interest rates and a large inventory and considering it is a buyers market in a lot of areas... it may be a damn good time to go ahead and buy that home. Historians may look back to this period of time and wonder what the fuss was with not wanting to committ, waiting for a more opportune time. There may be NO more opportune time than now. Of note, the preceding is a sales pitch delivered by folks to increase business and consumer confidence. The same can be written about all the bad news flying around. Don't think that news organizations aren't rolling in dollars about how much "bad news" is being reported.
- How much is the credit? Quite simply, 10% of the purchase of the home, a maximum available credit of $7500.00 worth of dead presidents.
- How will the IRS know if someone sells their residence before the 15 years are up? I gotta laugh at this question, though it isn't a stupid one. In my mind, the only stupid question is one not asked. To answer this, the website says the following: "Through both self reporting and third-party information." Right, how ripe. Without imposing political beliefs upon the masses, they will know. While I believe in conspiracies, this isn't one in my book. This is intelligence, the right kind. I know folks who blatantly took advantage of the system, good for you. Just don't bitch because we are all in a bundle. YOU were just as responsible...
- It's repaid, but how? After the second year of claiming the credit, you must repay that interest free loan. From what I've read, you will be repaying as an additional tax on your returns for the next 15 years.... $500.00 a pop.
One more thing, before I present the second thing which will end up "lastly". Real Estate Investors have been stifled because of all these happenings in the Mortgage World. Personally, I think that is a mistake. They say you can only own so many properties and your credit score has to be this and your mother has to a direct decendent of Henry the freaking 8th? Some folks invest in Real Estate for a living, don't ignore them. Keep that in mind PMI Companies and Credit Scoring Agencies, because I bet ya that you won't be running this industry much longer.
Lastly, and my English Teacher hated starting a sentence like that which is one of the reasons I just did... it's a buyer's market. That doesn't mean it is right for you, yet it is most certainly something to explore. In a few years, if you didn't pounce on this, you may just be making someone else a lot of money... who owns your home.
Direct website @ http://www.irs.gov/newsroom/article/0,,id=186831,00.html
Have some fun @ http://www.youtube.com/watch?v=tfBoMV-HIP4
Sardi
Good Evening Jason!
It's to late to give this the attention it deserves.
I'll get back to you.
Bill
Please do, Mr. Bill.
Jason- Great points. One more thing I noticed in the Bill, there is a provision that you may claim your purchase (in 2009) as a 12/30/2008 transaction. Essentially allowing you to buy now and receive the credit with your 08 return, or if your some uberorganized dude, you can do an amended return. Of course, everyone should talk to their tax advisor to ensure this is the case, blah, blah, blah. I've saved the info from the bill in case you're interested I'd be happy to email it to you.
Great overview Jason of the $7,500 tax credit program that first time homebuyers can take full advantage of this year. What tremendous detail you put into this.
I like how you present it...in lingo we all understand :) Thanks for the detailed report and I'm sure that everyone can benefit from your info!
Jason, I bet they turn this into an honest to gost tax credt that does not have to be repaid.
Matt - I'm aware of the bill and it does more for my clients than it does for me right now. Email it to me anyway. The day I sit and act like I can't or won't digest new info, opposing viewpoints, or contracting muscles due to increasing stress levels, I will hand in the rag.
Gary - Interesting. I'd be afraid if I went into any detail at all through my investors/talking points.
Sis - That's one of those "Great Post" comments hidden in disguise, isn't it?
Patricia - I won't be betting against that.
"There may be NO more opportune time than now." I've tried every non-lethal blunt instrument that I can find and I just can't seem to beat this into some people's minds. I firmly believe that buyers will never, ever, ever get deals (rates, selection,price) like this again. In fact, I'm putting my money where my mouth is and putting my house for sale to trade up.
If you don't mind, I'm going to click the little button in the top-right corner. Perhaps, I need a more eloquent approach than "What the hell are you waiting on!"
@Matt - I called the IRS at the beginning of the year and they verified that the credit can be claimed on your 2008 return even if you buy in 2009. Of course, check with your accountant....
The FTHB Tax Credit is a lot cooler than many think. The value of the "free loan" is actually around $2000. And that isn't a loan, but $2k in savings.
Jason... some good basic information in an easy to understand format... nice job....
Did you take Bob's advice on that longtail? Hope it brings you business, that term gets pulled up a lot in my stat's too.
Jason,
We have had several first timer's take full advantage of the program.....and now a contact opportunity to remind them of it for this years taxes......
I've had a few to take advantage of the tax credit, and few more that I'm sure will. It seems like a good program.
Erik - "If you don't mind, I'm going to click the little button in the top-right corner." Go right ahead brother-man. I was actually thinking about utilizing the title "What the hell are you waiting on!" but I opted for a kinder, gentler, approach:)
Lane - From everything I've gathered, I like the program. Time will tell on how much of a stimulus it is to the housing market.
Belonger - You know me, I'm a simpleton:)
Missy- I did actually read Bob's blog. While I didn't fully digest it, I got the drift. Most things I've learned from SEO came from right here on AR.
Dan - Indeed. This is a wonderful chance to follow-up with folks with meaningful information shall they be inclined.
JL - Seems like a good program to me as well. I suppose it wouldn't be a bad idea to reach out to a few accountants to perpetuate the cause.
Jason - we are hoping that this will be extended, or enhanced through the stimulus package.
Jason - we have great credit and are riding 5 mortgages at the moment. When we moved we were told that in order to buy a house in NC we had to eliminate one or more of the mortgages we currently have. Those mortgages are on investment properties which were purchased with a long term exit strategy in place, but alas ... apparently if we want to own a home in NC we have to abandon our investment strategy. Doesn't make much sense now, does it?
Eleanor - Extended until the end of 2009 would make sense to me. As far enhanced, I'd have to see the pork;)
Carol - Strange days indeed. I saw the smoke when my Rehab Lenders starting limiting it to 5 mortgages on credit. Wait, aren't you folks invested in lending money to the Real Estate Investors? Shoot, don't stifle them. If I had the proceeds, I would lend you money Carol:) Unfortunately, I don't make the rules right now.
Trumpeting this terrific tax incentive should be a top priority for everyone of us in this industry. It's the nudge new buyers need to give them a bit of breathing room when they make the leap. I love that they can take the credit this year for a purchase now.
This is just so very well written. You need to have your own column in a major publication sweetie :)
Jennifer - I contacted the National Enquirer but it seems they aren't hiring:)
Sardi,
Many thanks from me personally, you know I've been on a mission with this. I also hope it gets extended too, but do feel we need to keep the payback provisions. This program has helped me change the lives of many a young couple (no I'm not exaggerating) and will cost the taxpayers practically nothing. Wish we could say that about our bank bail out.
Add me to the reblog list!
Gerry Suarez, Jr.
Your FHA Loan Pro!
Gerry - I'm in agreement, keep the payback provisions and consider the extension... perhaps through 2009. As far as the reblog, that is a high honor in my book, my friend. I will leave you with two words, Thank You.
Sardi - it's a buyer's market. That doesn't mean it is right for you, yet it is most certainly something to explore. Of course you don't see that in the ads by the local real estate boards, or mortgage brokers, or NAR. They do mention the first, but forget that it's not for everybody.
Saunders - Very true. It's about time we re-define our industry for that very reason.
hey Jason -- I'm convinced this IS the very best time --- there will be some people who wake up in a few months, or more and say -- OMG what happened, I missed the boat! In Oregon thre are a few programs that if people use, they aren't eligible for the credit/loan --Oregon Bond Program being one. happy weekend -
Jason, I absolutely love the wit with which you put this important information out there for potential Homebuyers.
Jason,
I heard that the repayment requirement had been canned. Can you confirm?
Mike in Tucson
Alexsandra - It may very well be the best time to buy for some folks (low rates, tax credit, high inventory)... if you are in the position to do so... I say, "JUMP!"
Kathy - Why thank you. I hate the dry stuff, ya know?
Mike - I heard that it may be forgiven as well, which is probably a bad idea. I can't confirm or deny it for sure though.