Want $7,500? Buy a Home

What's the catch?

A possible hidden gem is emerging from the recent economic stimulus package.

Last year Congress tried to spark home sales by offering a first-time homeowner tax credit of $7,500.  But there was a catch:  The money had to be paid back within 15 years.

The offer, obviously, didn't interest many.  Paying back $7,500 wasn't very appealing. 

So when House Democratic leaders unveiled the latest stimulus package earlier this month, they revised that tax credit, offering the cash for nothing in return, according to the Washington Post.

It still has to make it through some legal wranglings before becoming official, of course, but in the meantime you can still take the money and hope you don't have to pay it back later. 

Only purchases of a main home located in the United States qualify, and the home must have been purchased after April 8, 2008, and before July 1, 2009.  However, there is an attempt to extend the deadline to Dec. 31, the Post reported.

The Post breaks down what it may mean to you:

  • The $7,500 available to singles, married couples filing jointly and unmarried co-purchasers, provided they meet the non-ownership test for the previous three years. Married couples filing separately can claim up to $3,750 each. Unmarried individuals can allocate the credit on their filings according to their respective ownership shares or capital investments in the house.
  • Only principal residences are eligible. No second homes, investment properties or houses outside the United States. It's not just conventional houses, however. It "can be a . . . houseboat, housetrailer, cooperative apartment, condominium or other type of residence," according to Form 5405.
  • Even if it's your first home purchase, you are not eligible if your adjusted gross income is above $95,000 (single filer) or $170,000 (married joint filers). Married couples with incomes between $150,000 and $170,000 are eligible for reduced credits, based on a phase-out schedule. Single filers with incomes between $75,000 and $95,000 also are subject to reduced credit limits.
  • D.C. home buyers who are eligible for the city's first-time buyer credit are barred from use of the federal tax credit. Taxpayers who use tax-exempt mortgage bonds issued by state or local governments to finance home purchases also are ineligible.
  • You can't claim the $7,500 credit if you buy your house from a "related person," meaning a spouse, parents, grandparents, children or a corporation or partnership in which you own more than 50 percent of the stock or capital interests.

More Information:

IRS Form 5405
IRS Guide on Homebuyer Tax Credit
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