Tax Breaks For New Home Buyers
According to The American Housing Rescue and Foreclosure Prevention Act of 2008, passed by Congress in July, first time home buyers who purchase homes between April 8th 2008 and July 1st 2009 are eligible for a first time home buyer tax credit. They can get $7,500 tax credit or up to 10% of the value of the home for home purchases under $75,000.
There are certain conditions though. The credit has to be repaid over 15 years, so effectively it’s an interest-free loan from the government. So if you buy a home this year and claim the credit next year, you start paying $500 back in your 2010 taxes which you would file in 2011. So at least you get a few years grace period before you have to start paying it back. Not sure what happens if you sell the home in 2010, though. Maybe you might have to pay back the entire amount in a lump sum.
There are also income exemptions. The credit is phased out for individuals with modified adjusted gross income (AGI) between $75,000 and $95,000. For married couples filing a joint return, the phase out range is $150,000 to $170,000.
But the good news is that if you haven’t owned a primary residence for 3 years by the date of closing, you’re now considered a first time home buyer again!
This is the government’s way to encourage home purchases and prop up housing for as long as possible. This is their “soft landing” approach, where by they try to drag out this mess for as long as possible. Instead of having a quick easy death for banks and mortgage companies, they’re going to keep interfering and prolong the recession.
Regardless of the motives behind it, its out there for home buyers. I’m not jumping to buy at this point since I think there’s probably a little more downside next year followed by several years of stagnation.
Foreclosures have hit record highs and there are seemingly good deals all over the nation. My condo is currently in foreclosure and several of my friends have expressed an interest in buying it as an investment. I’ve told all of them to wait until they can actually cash-flow on investment property. Unlike back in 2005, where it was common to be negative several hundred dollars on an investment property, today you should be able to get 6% or better cash-on-cash return. In fact, in some places you can actually buy properties for under $5,000 and your effective return might easily cross 25% per year.
Before you rush out and start buying any property, I suggest you read the following books:
- How to Save Thousands of Dollars on Your Home Mortgage
- What Every Real Estate Investor Needs to Know About Cash Flow
- Value Investing in Real Estate
![[del.icio.us]](http://images.del.icio.us/static/img/delicious.small.gif){kind=small}
- Is It Still A Good Time To Invest In Real Estate? Well, it depends on a lot of factors. Like where you're investing. There's a really good site called Housing Tracker that tracks the inventory and median home price for major cities. It has a pretty simple interface and its a great resource. Looking at Los Angeles I saw the inventory......
-
![\"The $1.75 House\"](http://livingoffdividends.com/wp-content/uploads/2008/10/buying_house_on_ebay-300x193-150x150.jpg "\\"The $1.75 House\\"")
Buying A House For $1.75 In what could possibly be the cheapest house ever sold, a woman decided to forgo her morning cup of Starbucks coffee and used that money to buy a house instead! SAGINAW, Mich. - With a winning bid of just $1.75, a Chicago woman has won an auction for an...... - The 35th Carnival Of Money Stories Welcome to the 35th edition of the Carnival of Money Stories. This edition is pretty big with 50 entries, so pour yourself an extra-large cup of hot cocoa and sit down for some serious reading. Debt Reggie presents Why Money is Debt - Part 1 posted at Reggie, the black......
Related Websites
- July 20th Roundup Sunday Money Madness is back again this week with more great mid-afternoon reads. Don't miss out on: Low Cost Weekend Idea: Borrow Library Videos from Blueprint for Financial Prosperity is a great idea for those who don't have Netflix and are looking to watch movies without having to go to......
- REAL ESTATE: Is this a Buying Opportunity? By Guy W. Close - Trust a real estate agent to put a positive spin on an otherwise incredible string of bad news about Canada's housing industry since last June. That's when the first year-over-year dip in average home prices in nine years appeared. It was a tiny dip, at 0.4%,......
- Why Real Estate Investors Should Buy Gold & Silver Real Estate Investing is the ultimate investment for passive income, without question, but only at the right time, during the right cycles! I have been investing in Real Estate for over 5 years and have learned that there are smarter ways to capitalize on Real Estate other than the obvious!......
[All content is copyright of Living Off Dividends & Passive Income]
August 17th, 2008 at 4:12 pm
Yes, they ARE dragging this out. If the banks made bad loans, and consumers overextended themselves, then it’s a learning experience for each, albeit an EXPENSIVE learning experience. The government (which is actually us taxpayers) can’t bail everyone out just because they made a mistake….
August 18th, 2008 at 11:16 am
Good point Quentin. You cannot privatize profits and socialize losses. That’s just retarded!
August 18th, 2008 at 11:37 am
I wonder who owns the first loan on the house, AKA who gets paid if it goes into foreclosure first. Also are there any other restrictions other than first home? It seems this would only encourage people that shouldn’t be buying homes to try and buy a home.
This just seems a bit sketchy.
August 27th, 2008 at 9:16 am
An interest free loan for first time home buyers? I suppose this is meant to encourage first time buyers to purchase already foreclosed homes. But, are those homes really priced at a level that first time buyers can afford? What price range are most foreclosures at? Will these homes being purchased cause more problems in the future? I don’t think the solution to a credit crisis is to offer more and cheaper credit.