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IRS offer credit to first time homebuyers

Posted by Jill Boynton January 14, 2009 09:30 AM

It's a buyer's market for homebuyers, and first-time homebuyers have an even greater incentive to make a purchase. The IRS is offering a credit for homes purchased after April 8, 2008 and before July 1 2009. While called a "credit", it's really more like a long-term loan at zero percent interest.

The "First Time Homebuyer's Credit" is equal to 10 percent of the purchase price of the home but the maximum available is $7,500, whether you're single or married. The credit reduces your tax bill dollar for dollar. Even if you owe no taxes you can take the credit and thus get a tax refund from the government.

The credit is really a loan, because it has to be repaid over a 15 year period. However you're getting the loan with no interest, which can save you a lot of money. Also if the homeowner took the credit and used it to pay down the mortgage he would shorten his mortgage by about 18 months and save over $23,000 in interest over a 30 year mortgage.

The credit is not available for second homes or rental properties, or if you've owned a home during the 3 years prior to purchase of the current home. Also it is phased out for couples with adjusted gross income over $150,000 (and single taxpayers with AGI over $75,000). Still, for those who qualify it is definitely something to take advantage of. For more information click here.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.
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About the contributors

Jill Boynton is co-founder of Cornerstone Financial Planning in Newington, N.H. Along with traditional financial planning services, Boynton provides analysis specifically for divorce.
Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.
Cheryl Costa is a managing director at AFW Wealth Advisors, which has offices in Natick and Purchase, N.Y. She advises clients on investing, education funding, and estate planning. She holds a master’s in business administration from Boston University.
Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.

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