$8,000 anyone?

$8,000 anyone? Really! If you’ve never owned a home before you can get $8,000 for buying a home between now and the end of November of this year. Honestly, I wish I didn’t already own my home! Therein lies some of the controversy with this Economic Stimulus Bill, but I’m not going to spend time on that… at least not in print! I heard from a Realtor today who said she had received 5 different answers as to her question to explain the home buyer tax credit within the new Economic Stimulus Package. So I sent the information below. If you know of someone that is considering purchasing a first home, tell them that they really need to act now. Very low interest rates and prices, desperate sellers, and an $8,000 credit/check from the government? Is this a dream?? Tax Credit for Homebuyers First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income. The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years. Tax Credit Versus Tax Deduction It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000! Phaseout Examples According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples: Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000. Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800. Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances. Homes that Qualify The tax credit is applicable to any home that will be used as a principle residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principle residence also qualify. If you know someone that could benefit from this tax credit, please forward this email to them. And of course, you’re warm referral of our service would be greatly appreciated! We’re providing a professional approach to mortgage finance!

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