New Housing Bill and First time home buyer credit.?

Question

The House and Senate recently passed American Housing Rescue and Foreclosure Prevention Act of 2008 which will now become Law once president signs it. One element of the bill is a tax credit of up to $7,500 for first-time buyers, an incentive which ends up translating into an interest-free loan payable over 15 years. Can someone tell how this will work out and what would be the procedure to claim it?

Answer 1

Good question.  I'd like to know a definitive answer.  From what I've read, you will receive the tax credit on your government refund check.  So you will file taxes and they will give you a credit.

So your tax advisor should know what to do with it.

Answer 2

Yes, you could get that much as a refund. However, in your hypothetical example, you would only get the full $8500 if you are paying at least that much in federal taxes that year. Tax credits reduce the amount you are paying in taxes, but the government doesn't give you extra money if your tax due is less than your tax credit.

If you do buy a first house, I would recommend lowering your tax withholding so that you can start saving the money now, rather than waiting to get the refund. See http://activerain.com/blogsview/608981/H... for more details.

The procedure to claim the credit will be determined by the IRS at some point in the future and will likely involve yet another form to fill out and include when you file your taxes. I'm sure programs like TurboTax will ask the question and automatically claim the credit for you.

I'm personally going to be taking advantage of this credit and enjoying the interest-free loan.

Answer 3

Sucks that there is no clarity around this yet. The initial WSJ article over the weekend did not even say that the 7500 needed to be repaid - it implied the money was yours to keep. The CNN Money article says that it needs to repaid.

I tried to search for further details on the internet, and there isn't good info yet.

Answer 4

I ran across this site.  Seems like pretty credible info about the "credit".  Hope it helps you guys out.

http://activerain.com/blogsview/576463/T...