Saturday, April 09, 2011

Remember That $7,500 First-Time Home-Buyer Credit?

According to reports, the credit has turned into quite a headache for the IRS, as taxpayers who took advantage are supposed to begin repaying the loan.


    Under the Housing and Economic Recovery Act, certain homeowners were eligible for a tax credit equal to 10 percent of the purchase price of a home, up to a maximum of $7,500. Married individuals filing separately could get a $3,750 credit. Unmarried people who jointly purchased a home were allowed to divide the credit.

    Buyers jumped at the opportunity. Now the repayment process is causing the Internal Revenue Service some frustration.

    It was never fair to call the original first-time buyer stimulus a credit. It was an interest-free loan. Those who took the credit are required to repay the government over 15 years in equal installments for any amount received. So if you qualified for the maximum credit of $7,500, this means a yearly loan payment of $500. The loan/credit applied only to homes purchased after April 8, 2008, and before Jan. 1, 2009.

    To further boost housing sales, Congress added two additional tax breaks for home buyers. Which credit you claimed depended on when you purchased your home. An $8,000 credit became available for qualifying first-time buyers who generally closed between Jan. 1, 2009, and April 30, 2010. If you had a binding sales contract signed by April 30, however, you had up to Sept. 30 to complete the sale and still qualify for the credit.

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