2009 Home Buyer Tax Credit

Everybody and their dog from TV and Radio is going to be advising you to go out and buy a house.  If you are smart and in the know you will hear it first here at the Oklahoma City Real Estate Blog. 

The Fed said Wednesday that it would put over a Trillion Dollars into the economy.

$300 Billion Dollars of Long Term Treasuries.

Another $750 Billion Dollars of Mortgage Backed Securities.

Purchase of Freddie and Fannie debt of up to $200 Billion Dollars.

Keep the Fed Fund Rates between 0 and .25 for a long time.

What does this all mean?  It means interest rates are going down and the Fed has got your back.

How do you take advantage of this.  Buy a house and find it quick.  The ridiculously low interest rates along with the First Time Home Buyer’s Tax Credit is going to heat up the market.  The builders have quit building.  There is over three years of pent up demand for housing and when they come flooding back in the supply will not be there.  I know there is a lot of supply but when you subtract all the busted up foreclosure that most do not want or can’t get financing for you have very few houses.  I will say it again there are very few good houses on the market for serious buyers and as the army of sideline buyers enter the game, prices on good homes are going to go up.  So in short, if you do not move quickly you will pay more for your house and you will be talking about the chance that you missed.  If you wait for the statistics to show this or you are waiting for all the reporters to tell you now is the time to buy a house you are going to miss the boat.  If you want to hear someone call a bottom to the housing market.  Here it goes. 

 This is the bottom of the housing market. 

If you buy a house now you will be rewarded.  There you  have it.

The new stimulus bill has been signed and in it was included the latest incarnation of The First Time Home Buyer Tax Credit.  So here is what you need to know.

First Time Home Buyers

First time home buyers are eligible for the tax credit.  People who have not owned a home in the last three years are considered First Time Home Buyers and are eligible for the First Time Home Buyer Tax Credit.

Income Limits

For the full credit you must make less than 75k if you are single and 150k if you are married.

2009

The Tax Credit is for First Time Home Buyers who purchase a home as a primary residence in 2009.

$8,000.00

The tax credit is 10% of the home purchase or $8,000.00 whichever is less.

No Payback

The old $7500.00 tax credit had to be paid back over 15 years.  The new tax credit is a freebie.  No payback as long as you live in the home for 3 years. 

Refundable

This means you get a check.   Unlike a deduction which just reduces your tax liability, the new first time home buyer tax credit drops straight to the bottom line.  Figure out what your taxes are without the credit then move the number $8,000.00 in your favor.  Example: without tax credit you owe $3,000.00.  With Tax Credit you get a sweet check for $5,000.00.

I usually like to end with a call to action like now is a great time to buy a house, but if you can’t do the math on this one then maybe you shouldn’t buy a house.  If you have any questions about the details email me.  If you are ready to get started looking for a new home email me.  Carpe Diem.

Only you can truly answer that question.  As you look at the prospect of a home payment it may seem quite daunting but here are a few things to consider.

Home prices historically have risen about 6% a year.  Meaning the home you are purchasing may be one of the best investments you make and as your investment grows you are able to enjoy the comforts of your home as well.

 The primary vehicle to retirement security for many has been their home.  The US savings rate has steadily declined from almost 10% in the 1960s to zero in this decade.  The counter force to this for many has been the appreciation of their home.  Home equity has been the saving grace for many a retiree.

One of the final things to consider is this.  Your house payment will be fixed.  Your rent is not.  Each year your payment will seem smaller and smaller.  As time goes by your salary will go up.  Prices of most things you buy will go up but if you have a fixed rate loan your payment will be the same.  So in a way you are locking in the price you pay for a place to live for 30 years.  After that of course you will be paying nothing.  Imagine now two peope who had a choice to buy a house or rent 30 years ago.  The price to rent or the payment to buy would be about the same.  It would have been about $200.00 for the average house.  Flash forward 30 years to 2008.  The guy who chose to rent would now be paying about $800.00 with an infinite number of ever increasing rent payments to go. The guy who bought a house would now be making his last payment of $200.00.  Which guy do you want to be?

Just thought I would write a little about the first time home buyer tax credit.  First of all it is a credit not a deduction, which means it comes straight from the bottom line.  So, if you owe $1000.00 on your taxes then with the $7500.00 credit you will receive a check for $6500.00.  A deduction comes off of your taxable income.  The credit is much better.  However in this case the credit is actually a loan that must be paid at $500.00 a year for fifteen years.  Those who do the math will realize this is interest free.  Not as great as free money but you will never get a loan with better terms.

Who is Eligible

First time home buyer is defined as a buyer who has not owned a principal residence during the three-year period prior to the purchase.

Limited Time

The Tax Credit is eligible on home purchases between April 9, 2008 and July 1, 2009.

Income limit

The income limit for the full credit is $75,000.00 for singles and $150,000.00 for married people.  Partial credits may apply at higher incomes.

How Much is the Credit

The Credit is 10% of the home purchase or $7500.00 whichever is lower.

As far as I could find this tax credit does not disallow you from the tax deduction you get on mortgage interest.  So in short if you are currently throwing your money away on rent you should talk to your accountant to verify your situation and then go out and claim your little part of the world.  The time will probably never be better than right now. 

For more information you can check out the National Association of Home Buiders tax credit site at FederalHousingTaxCredit.com