First Colorado Land Office, Inc. Salida, Colorado Real Estate
MLS - Multiple Listing Service
Licensed real estate agent.
7385 W Hwy 50
Salida, CO  81201
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Salida Colorado Real estate
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First Time Buyer Tax Credit
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First-Time Buyer Tax Credit: Why Buy Now

The homeownership tax credit that the federal government created earlier this year is a hard-
won tool at your disposal to encourage your customers to jump off
the fence and get into the home buying market.

When you combine the tax credit with today’s continuing low interest rates, large selection of
for-sale inventory, and low home prices, many of the pieces are in
place for your customers to buy now.

How the Tax Credit Works

The First-time Home Buyer Tax Credit was passed this year as part of the Housing and
Economic Recovery Act (H.R. 3221) on July 30 and targets any
individual or household that hasn’t owned a home for at least three years. Taxpayers can
take the credit on their 2008 tax return if they bought their house this
year after April 9.

It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit
ends July 1, 2009, so if your customers wait to buy in the first half of
2009 they can take the credit on their 2009 tax return.

The actual credit amount is set as a percentage of the home purchase amount. That
percentage amount is 10 percent, so your customers can get 10 percent of
the home price credited against their tax liability, up to a maximum $7,500.

Income limits are $75,000 for individuals and $150,000 for households. Individuals whose
income exceeds the $75,000 limit but isn’t more than $95,000 can still
take the credit but on a reduced basis. The same thing applies to households earning up to

Any house is eligible as long as it’s a primary residence and is in the United States.

Buyers Have 15 Years to Pay Back

To help keep the program cost effective for taxpayers, the federal government requires the
tax credit to be paid back in small, 6.67-percent increments over 15
years, although repayment will be no more than $500 yearly and payments will not start until
2011. For that reason, some analysts have likened the credit to a
15-year, interest-free loan to help make home buying affordable.

There’s one restriction on the type of financing that your customers can use if they plan to
take the credit. That restriction is on tax-exempt mortgage financing.
That only applies if your clients are using below-market interest-rate financing from a public
agency or nonprofit that’s funding the loan using proceeds from a
tax-exempt mortgage-revenue bond issue. For most buyers, this won’t be an issue. It’s
mainly an issue for low-income buyers using special mortgage financing.

Be a Resource for Clients

NAR Government Affairs has created two helpful documents that you can share with your
clients to help them learn more about how the tax credit works. The
documents are on downloadable and printable PDFs:

The IRS Web site also offers
tax-credit guidance in an article that provides answers to many
frequently asked questions.

And don't forget about, which is a great source for more information on all
aspects of the Economic Stimulus Bill passed July 30.
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