Important things to know about the Tax Credit:
*The money is not immediately available to the home buyer! The buyer must fill out a specific form when filing their 2008, or 2009 tax returns. (Note, buyer can file an amended tax return to their 2008 tax returns if they buy a house in 2009, and still get the tax credit in 2009 instead of waiting!) They then receive the money as though they would be receiving a tax refund. Please know this is not a tax refund or a tax deduction, this is essentially a 0% interest loan.
*Must be a first time home buyer OR buyer can not have owned a home in the last three years.
*Buyer can claim a credit of up to 10% of the purchase price, with a max credit of $7,500.
*Repaid over 15-years with no interest.
*$500 per year repayment at time of doing taxes each year.
(Example: If buyer was expecting $1,000 back on taxes, buyer would only receive $500 back. If buyer had to pay $500 on taxes, buyer would actually need to pay $1,000. Caution - if buyer cannot come up with money at tax time there are penalties and fees!)
*If buyer bought/buys the house in 2008, and filed for tax credit on 2008 tax returns, buyer would not need to start repayment until 2010. (Credit available to home buyers after April 9th, 2008)
*If buyer buys a house in 2009, and filed for tax credit on 2009 tax returns, buyer would not need to start repayment until 2011. (Credit available for home buyers up until June 30th, 2009) (Please note the above - tax credit available immediately in 2009 IF buyer files amended tax return for 2008)
*Full $7,500 available for singles with gross income of $75,000 per year, OR joint filings with gross income less than $150,000 per year. The tax credit phases out from there until single filing reaches $95,000, and joint filings reach $170,000. After which no tax credit is available.
*Important! If buyer is expected to pay (example) $4,000 in taxes on returns, and is applying for the $7,500 tax credit, the buyer would actually only receive $3,500. Vice versa if buyer is to receive $1,000 back on taxes, buyer would actually receive $8,500 back.
*No restrictions on location or type of house.
*No restrictions on what the money is used for. Can be used for remodeling, paying off credit cards, etc.
*Tax credit is not available for nonresident aliens, or if the home is anything other than a primary home.
*If buyer sells house before repayment period and has no gain on the sale, buyer will not be expected to pay the credit back. If the buyer has a net gain, the "recapture" cannot exceed the amount of buyers gain.
Information Provided by:
Zac Ellerbroek
Independent Mortgage Broker - Treadstone Mortgage
