Tax Credit

New Tax Credit for First-Time Home Buyers

Regardless of how economists refer to the status of our current economy, it’s evident many people have shifted their spending gears into neutral. Choosing then to accelerate spending during uncertain times, however cautiously, will probably feel a bit uneasy. The recently-passed economic stimulus package was meant to gently nudge consumers out of their holding patterns so that spending could begin to flow - or at the very least trickle. But what about big purchases?

One sector of our economy needing more than a gentle nudging to recover from the congestive effects of the recent economic slowdown is the housing industry. Even the fast-growing active adult sector has had its woes. Some retirees ready to make a move into an active adult community have found difficulty selling their current home causing them to postpone a new home purchase.

Included in the stimulus package is what is referred to as a tax credit of up to $7,500 for first-time home buyers making a home purchase between April 9, 2008 and July 1, 2009. It is hoped that this substantial credit could give the housing industry just the boost it’s been needing. And that would be good news for active adult home buyers and sellers, too, as the definition of a “first-time home buyer” is quite generous. To qualify for the tax credit, the buyer cannot have owned a principal residence during the three-year period prior to the purchase, though they may have owned a home before that time.

But is this really as great news as it sounds? Well, that depends. As it turns out after reading the fine print, this “tax credit” will need to be paid back over a 15-year period. Some people prefer to think of the credit as an interest-free loan. This may turn out to be a positive thing for some looking for a new home purchase, true, but people definitely need to read the fine print and know that sometimes, as the old saying goes, “if it looks too good to be true, it probably is”.

To learn more about this new legislation and the first-time home buyer tax credit in particular, visit: www.federalhousingtaxcredit.com.