The American Recovery and Reinvestment Act as it pertains to first time home buyers who purchase single family residential property on or after January 1, 2009 and before December1, 2009. A person is considered a first time home buyer if they have not owned a principle residence in 3 year previous to purchase. Tax credits for purchases made between Jan.1, 2009 and Dec. 1,2009 are a “refundable tax credit” that amounts to 10% of the purchase price not to exceed $8,000.
An example would be the purchase of a $90,000 house. 10% of $90,000 equals $9,000. The tax credit cannot exceed $8,000, therefore the amount of credit the purchaser receives on his/her 2009 tax return is $8,000. Lets say you work a regular 40 hour week and taxes are withheld from your pay check each pay day. At the end of the year you do not owe taxes nor will you receive a tax refund. The $8,000 tax credit is added to the amount of tax withholding that was deducted during the previous year and in this example the tax payer would receive an $8,000 tax refund!
By the way, did I mention that this tax credit is a gift for first time home buyers and not a loan…you don’t have to pay it back!! That is as long as you stay in the house for a minimum of 3 years.
A $90,000 house can be purchased on an FHA mortgage for about $8,000. So, if you qualify as a first time home buyer, you can buy a house for nothing or near to nothing. This is just another reason why now is one of the best times for first time home buyers. Please note that I am not a tax preparer and this information should be confirmed by your tax professional.
Avg. Sales Price: $78,873
Avg. Days on Market: 81
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