Consumers looking to buy a new house can now heave a sigh of relief as the USA government has decided to allow first home buyers a tax credit of up to $8,000 on the purchase of their new homes. However it is important that consumers understand the criteria and implications of the first-time home buyers tax credits.

Important Facts About First-Time Home Buyers Tax Credit Scheme

Initially the proposed amount of the federal housing tax credit for first home buyers was supposed to be $15,000. However after negotiations the formally approved amount was capped at $8,000 and was sanctioned by the president.

• Tax Credit Amount: While the federal housingtax credit is decidedly 10 percent of the purchase price of the house, the ceiling placed on the first home buyers tax credit is $8,000.  This amount is only applicable to first home buyers who are looking to buy an owner occupied property. Unlike its predecessor of $7,500 the new tax credit of $8,000 does not need to be paid back. This is an effort in conjunction with the stimulus package to help boost the real estate sector. In addition to this a First Home Buyer for the purpose of the tax credit is defined as a person who has not owned a principal residence for 3 years prior to applying for the tax credit.

• Who Is Eligible?: It must be remembered that this amount only applies to first home buyers who are buying their property on or after 1st January 2009 and prior to the end of December 2009.

• Income Tests: In order to be eligible for the entire grant singles need to be earning a gross income of $75,000 or less and couples a combined income of $150,000 or less. Individuals or couples earning more than the stipulated thresholds may be entitled to reduced grant amounts.

• Refundable Tax Credit: Owing to the fact that the federal housing tax credit is refundable, qualified first home buyers, can take advantage of the same even if they do not have much of a tax liability.

• Recapture Of Tax Credit: First home buyers in order to be able to take full advantage of the tax credit need to hold their individual homes for at least a period of 3 years, or else they will be liable to pay back the tax credit. However certain exceptions such as death and divorce are allowed as unforeseen circumstances.

While the new and revised First Home Buyers Tax credit is an effort to help individuals and families realize their dream of owning their own home, it is also essential that consumers fully understand the implications of the first home buyers tax credit. While the government has stipulated it to be worth 10% of the purchase price it is capped at $8,000. Unlike its predecessor this grant is not repayable within 15 years. However, the applicants need to meet certain income thresholds in order to qualify and also the amount can only be applied to owner occupied properties and the applicant(s) should not have owned a principal residence in the last 3 years. It is always recommended that individuals and families should do their research in order to fully understand the parameters and criteria of the first home buyer tax credit.

References:

1. First-Time Home Buyer Tax Credit – Federal Housing Tax Credit
2. First-Time Home Buyer Tax Credit: 6 Things to Know – U.S. News