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First Time Buyer’s Huge (Temporary) Tax Credit

by

Christian Jacobsen

You lucky bunch! First time buyers can get a tax credit for as much as ten per cent of a first home purchase (but it must be less than a $7500 refund) . Yep, this is all part of the recently-passed and much publicized Housing and Economic Recovery Act of 2008 .

However, the fact that it is much publicized should mean that every young renting family should know about it – but according to a recent survey, at least 77% of renters do not. This lack of knowledge could be costly because the tax credit is only designed to be a temporary boost and will not be there for long. This concession by the Government offers quite a substantial saving. Think about it – ten per cent on a home that costs $75,000 means that you will be allowed the maximum tax credit of $7,500! Free tax credits! Substantial free tax credits!However, just a reminder: if you buy a home of $100,000 on which the ten per cent is calculated to be $10,000, you will still only be able to claim a tax credit of $7,500 as this is the maximum allowable.Alternatively, if you purchase a home of $50,000 on which the ten per cent is calculated at $5,000, you will only qualify to claim the tax credit on the maximum 10% of the purchase price i.e. the $5,000.New (brand new) housing sales are predicted to bottom out in the spring of 2009 and then they may start rising according to a comment made by Lawrence Yun, National Association of Realtors (NAR) Chief economist. Now is an excellent time to get ‘your house in order’. Ensure that your credit rating is up to par, approach your bank or broker to arrange pre-approval to finance a mortgage for you, and check that you have enough savings to deposit a down payment as well as moving and closing costs.Part of your pre-approval will point you to which price properties you will be able to consider. Of course, we always want the homes in the next price bracket up – but you can lose a home this way. Be wise and be content with ‘starting’ on the bottom rung of the realty ladder; its not often that there is the chance to have a safety net put in place by the government!

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