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$8,000 TAX CREDIT FOR HOMEBUYERS
The $787 Billion stimulus bill is made up of tax cuts and spending
programs aimed at reviving the US economy. Although the package was
scaled down from nearly $1 Trillion, it still stands as the largest
anti-recession effort since World War II. One of the major benefits
of the plan is a tax credit for new homebuyers. According to the
plan, 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.
It's important to remember that the $8,000 tax credit is just
that... a tax credit. 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 you were to owe $8,000
in income taxes and would qualify for the $8,000 tax credit, you
would owe nothing.
Better still, the incentive is refundable, which means you can
receive a check for the credit even if you have little income tax
liability. For example, if you're liable for $4,000 in income tax,
you can offset that $4,000 with half of the tax incentive... and
still receive a check for the remaining $4,000!
Who Qualifies?
The $8,000 incentive starts phasing out for couples with incomes
above $150,000 and single filers with incomes above $75,000 and is
phased out completely at incomes of $170,000 for couples and $95,000
for single filers. To break down what this phase-out means, the
National Association of Homebuilders (NAHB) offers the following
examples:
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Example 1:
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Assume that a married couple has a modified adjusted
gross income of $160,000. The applicable phase-out
threshold 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
incentive to this couple, multiply $8,000 by 0.5. The
result is $4,000. |
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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 to reduce the tax liability by $2,800. |
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 to reduce the tax liability by $2,800.
Remember, these are general examples. Borrows should consult a tax
advisor to provide guidance relevant to their specific
circumstances.
What Type of Home Qualifies
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 homes and
houseboats used for principle residence also qualify. Buyers will
have to repay the credit if they sell their homes within three
years.
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