Sep
24
$7,500 Tax Credit for Buyers….Not so fast!
Posted by Maureen Webber under For Buyers, For Realty Professionals, General Information
Buyers Beware: You may have been inundated with e-mails from mortgage lenders touting the new $7,500 “tax credit” being offered by the federal government for first time home owners who’s home purchase date is on or after April 9, 2008.
Not so fast…this “tax credit” is really just a loan in disguise. The way it works is that a credit of $7,500 will be applied when you file your taxes for the year of the home purchase and you will receive a refund based on what you owe the government in taxes. If you owe $2,000 and the credit is applied, you will get $5,500 back. If you are due a return of $2,000 and the credit is applied, you would get $9,500 back. Sounds like a good deal right? Sounds too good to be true? Well….it is.
This “credit” is really just a loan from the government and you will be expected to pay back 6.67% of it every year for the next 15 years. If you sell the home before 15 years is up, you will expected to pay back the remainder due immediately.
This portion of the Housing and Economic Recovery Act of 2008 is worded as if it’s a First Time Homebuyers Tax Credit…but that title really doesn’t tell the whole story. What at first seems like an attempt from the governement to help convince first time buyers that NOW is the time to buy, is really just another way for people to become confused and get in over their heads. And isn’t that a big part of what got us into this housing mess in the first place?
After talking with your accountant you may determine that this “credit” is right for you, but don’t buy a house simply thinking that the government is giving you a $7,500 break, because you will be sorely disappointed when you find out that instead of a “credit” you now have another debt.
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