$8,000 Home Buyer Tax Credit
The federal government is offering a tax credit of up to $8,000 for people who purchase a home before December 1, 2009 subject to some restrictions. It is often called a “First Time Buyer” tax credit but this isn’t really accurate since it’s available to anyone who has not owned a home in the past 3 years.
The credit is for 10% of the sales price up to a maximum of $8,000 so as long as the home sells for at least $80,000, the buyer will get the full $8,000 credit. It is also a refundable credit meaning that if the buyer doesn’t owe $8,000 when they file their 2009 tax return, they can get the rebate as a refund.
I see and hear of many potential buyers trying to decide if they should buy now or wait and I can’t help wonder how they could pass up this once in a lifetime opportunity. Sure if there’s a chance they’ll be leaving the area, they probably shouldn’t buy a home but for those who aren’t going anywhere, how else are they going to get $8,000 just for doing something that makes sense anyway.
I played around with a loan amortization table to see what the effect would be if someone got the tax rebate of $8,000 and then paid that towards the principle of the loan on the home. As an example I used a loan amount of $150,000 at 5.5% and a standard 30 year term.
If they paid an additional $8,000 towards the principle 12 months after they bought the home (once they filed their tax return for the next year and got the refund), the home would be completely paid for 42 months early and they would save over $27,700 in interest over the life of the loan.
To me, that’s truly amazing especially for someone who is already paying rent anyway.
For more information, visit Federal Housing Tax Credit.com.
