With the passing of the new Omnibus Housing Bill recently, first time home buyers that purchased a home using an FHA Mortgage are now eligible for a tax credit of up to $7,500. However, there have been some misconceptions when reviewing this credit and home buyers are being mislead.
Some of the common parts of this bill that are overlooked follow here. The $7,500 is a maximum credit for those who file jointly. This $7,500 again is a maximum, but will be determined exactly at 10% of the purchase price of your new home. If you file single, the maximum credit is only $3,750. Also, this credit is not in all respects a credit, as it is a dollar for dollar reduction in what the tax payer owes. It is also repayable to the government at $500 per year over the next 15 years, or when the home sells. To receive this credit at all you need to have been a first time home buyer, defined as a buyer that has not owned a home in the last three years – and also applies to any co-borrowers on the loan. Some further information that seems to be left out is that the head-of-household need to have adjusted gross income of $75,000 or less to receive the credit. If you file jointly, you need to be at $150,000 or less.
If you look at this credit in depth and from all perspectives, it doesn’t seem as great of a deal as the government and other would like to lead these first time home buyers to believe. In the midst of a struggling economy and housing markets in most areas trying to correct themselves from the problems they have endured, you would think the government could come up with something better for first time home buyers. Instead they came up with this “credit” and take away down payment assistance programs.
I’ve been reading along for a while now. I just wanted to drop you a comment to say keep up the good work.
This is an excellent post. I have also been blogging on this topic, but can’t seem to find one piece of information. Do you know if the tax credit only applies if the buyer uses FHA financing, or does it apply for a buyer with any type of financing?
Question: Why is it that a couple with a combined income of 149,000 would qualify for the first time buyer $7,500 income tax credit and a single parent making $50,000 less a year ( $97,000 and also losing disposable income to child care does not? Two adults w/ no kids and no expenses except themselves can make up to $150,000 , but a single parent can only make $75,000.??? Doesn’t seem fair to me. I spend $15,000 a year on child care( that is $12/hr before and after school three days a week and one weekend a month: that is 1,200 /mos. so , after I pay 15K in federal, 8K in DC wage tax and child care my take home is about : 60K, before housing, food, utilities, etc… but wont qualify for anything….Can you explain to me why single and head of household count as same when even federal tax code acknowledges in form of tax credit that you have less disposable income to tax ?