Under President Obama’s foreclosure plan, first-time homebuyers will be given up to $8,000 in tax credit, which they can claim in their returns for 2008 or 2009. The exact amount is the lesser value between $8,000 and 10 percent of the value of their home.
What is especially great about the tax credit is that first-time homebuyers can claim the $8,000 as a refund on their 2008 taxes. They also receive the full amount of $8,000 tax credit even if their tax liability for 2008 is less than $8,000. They can then use this $8,000 to add to their downpayment on a house.
To be eligible for the tax credit, first-time homebuyers must buy their homes between January 1, 2009 and November 30, 2009. Taxpayers are considered first-time homebuyers if they have not owned a house since 2006. They must also commit to live in the home they buy for not less than three years, otherwise they will have to return the $8,000 tax credit.
The credit is also restricted to taxpayers with gross incomes of less than $75,000 for individuals and $150,000 for couples. Homebuyers earning above these brackets may be given a partial credit. The process of application for the $8,000 home-linked tax credit has been made easier for the homebuyer. Homebuyers just claim the credit on their 2008 tax returns. For those who have already filed their returns, they can amend their returns to claim the tax credit.
Although people in the housing industry are generally pleased with the $8,000 credit, they are still disappointed that the Senate and House did not pass the proposed credit of $15,000 to all homebuyers. Bernard Markstein, an economist with the National Association of Homebuilders (NAHB), said the $15,000 credit would have helped more homeowners and would have revived the foreclosure-laden housing market faster.
Nevertheless, as economist Lawrence Yun has expressed, the $8,000 credit would add about 300,000 new buyers into the housing market loaded with foreclosed properties. He also said that the credit would start a domino effect in the market, with the first-time homebuyer buying a home sold by someone also buying another home.
In real estate lecturer Mark Goldman’s opinion, many people wanting to buy a home would not be able to benefit from the $8,000 credit because they do not have the down payment needed to buy a home, even a low-cost foreclosed home.
Even so, Yun added that the $8,000 could be treated as a reduction on the cost of a home, or an initial home fund from which new homeowners will get money to pay for repairs or appliances, things that could start an increase in consumer spending that helps stimulate the foreclosure-burdened economy.
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