Buying a First Home? New tax break in store for you

Kay Bell writes in Bankrate.com about one part of the Housing and Tax Assistance Act of 2008,

Buying your first home is enough of a challenge in good times. In today's economy, it's almost impossible for some people. So in 2008, federal lawmakers enacted tax legislation they hoped would make the process a bit more affordable. Then in February, the home buying tax break was enhanced.

Unfortunately, the back-to-back changes in the first-time homebuyer credit also created a lot of confusion.

As with many government programs, you have to dive beneath the surface to understand a program and this one is no exception because it is a loan, not a true tax credit.

Typically, tax credits

"allow you to reduce your tax bill dollar for dollar. If you owe the IRS $1,000 and qualify for a $500 credit, your tax bill is halved. The best credits are refundable, meaning that you get the tax break's full value even if you owe no tax. If you owe the IRS $250 and the $500 credit you claim is refundable, you get to wipe out your tax bill and then get the $250 excess credit back as a refund check from Uncle Sam."

"But the original credit for first-time homebuyers, while refundable, must be paid back in equal installments over 15 years of subsequent tax filings. That means homeowners who qualify for the full credit would face a $500-a-year payback, starting with their 2010 return."

So in essence, the 2008-version credit is simply an interest-free loan.

There are other criteria that must be addressed before the program will benefit you. For a full copy of the article go to "First home, new tax break."

Vested Title Inc.
648 Newark Avenue, P.O. Box 6453, Jersey City, NJ 07306
Tel 201-656-9220 - Fax 201-656-4506
E-mail vti@vested.com - www.vested.com

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