What could you do with an extra $8000? If you’ve never bought before or have had no home ownership interest in the previous three years, you could make an easy $8000 if you buy before December 1st, 2009. This article below from the Chicago Tribune talks about the decision to buy now, while loans are cheap and the government is giving you a great rebate.
Call or email us today to see if now is a great time for you to get into the Real Estate market, while there is great inventory with low prices, and low rates! kjpremier@atproperties.com.
Stimulus plan’s $8,000 housing credit can be sweet in the right circumstances
Chicago Tribune
April 13th, 2009
Receiving $8,000 to buy a house is a tempting deal.
And Uncle Sam is willing to offer it to you, under certain conditions.
Under the economic stimulus plan that became law last week, if you are buying a home for the first time, you can get your hands on up to $8,000. In fact, if you are one of the savvy people who saw the housing bubble threat in 2005, sold your home and have been renting since then, this could be an especially sweet deal if you go bargain-hunting this year.
Under the rules for the new $8,000 tax credit, you have to buy your first home between Jan. 1 and Nov. 30, or have had no ownership interest in a home for the last three years, said James Seidel, director of federal taxes for Thomson Reuters.
This could be a way to help come up with a down payment, or to receive $8,000 to save for emergencies. Keep in mind, however, that Uncle Sam doesn’t put the money directly into your hands when you need it most—at the point when you close, or complete the legal formalities, on the purchase of your home. You must come up with your down payment, then file your tax return and seek the $8,000 as a tax credit.
As a credit, you receive money the way you would a tax refund. The good part: This is a refundable credit, which means that even if you do not owe much in taxes, the government will give you the money, Seidel said. That makes it better than a normal credit or a deduction.
There are some caveats: You would receive less than $8,000 if the house you buy costs less than $80,000, or if you owe the government taxes that weren’t taken out of your paychecks. The $8,000 is a maximum. If the house you buy costs less than $80,000, you will receive 10 percent of the price.
For people desperate for a down payment, the waiting period might not work. But for those who can turn to a relative for $8,000, the home buyer could use the cash at the closing on their new home, move into the house, apply for the credit on their 2008 tax return, obtain the money from the government and repay the relative if necessary.
The $8,000 credit that just went into effect is a much better deal than the one aimed at luring home buyers last year. In 2008, first-time home buyers could receive a $7,500 tax credit, but important strings were attached: The home buyer has to repay the sum to the government over 15 years.
In contrast, home buyers this year can receive $8,000 without any obligation to repay the money, provided they live in the home for three years.
And if people buy a home soon, they can capture the new $8,000 credit quickly, on their tax return for 2008.
Even if you filed your 2008 tax return already, a first-time buyer can still claim the credit on a home purchased early this year. Seidel suggests filing an amended return with Form 1040X. If you plan to buy a home later this year, you can request an extension of your 2008 taxes and claim the credit as you complete your tax return by Oct. 15, Seidel noted. The other option is to claim the credit on your 2009 tax return.
Despite the attractive credit, buying a home is not a simple decision.
Home prices are still dropping, and unemployment is rising, so think carefully about whether your job is secure and how you will pay for your home if you lose income.
As a rule of thumb, people should not buy homes if the monthly payments will consume more than 28 percent of their income and if they are carrying balances on their credit cards from month to month.
Before buying, run through your income and expenses to make sure a house is affordable now and will continue to be if you face a layoff. For a new homeowner, keep in mind that you must calculate mortgage payments; condo fees, if applicable; property taxes; homeowner’s insurance; utilities; and maintenance. As a rule of thumb, it’s wise to put aside $150 a month for repairs in case you must call in the plumber or face some other unbudgeted expense. Try working a budget with www.kiplinger.com/tools/budget/index .html.
To compare the cost of renting versus owning, try www.dinkytown.net/java/MortgageRentvsBuy.html.
