As I’m sure most of you are aware, the 2009 First time Homebuyer’s Tax Credit was extended to April 30, 2010 and current home owners may be eligible. The Worker, Homeownership, and Business Assistance Act of 2009 extends the tax credit through June of 2010, but you must sign a commitment contract by April 30th. So if you are planning to take advantage of the tax credit, you better get a move on. Here’s some highlights:
- 1st time home buyers can claim up to $8,000 or 10% whichever is less. So if you purchase at $70,000 home, you only get a $7,000 refund
- Income must be below $125,000 for individuals and $225,000 for married couples to be eligible
- Must be 18 or older
- You can’t receive credit on a home that costs over $800,000
- Current home owners may be eligible for a $6,500 credit (conditions and restrictions apply)
There is a lot of buzz in the personal finance community about renting vs. buying, when to buy, how much down payment etc. My advice to anyone is not to let the tax credit dictate rather now is the time for you to buy or not. Ask yourself, “Would I be looking to buy a home this year if the tax credit was non-existent?” If the answer is yes, then get moving (literally and figuratively), you only have a few weeks left before the tax credit window closes. However, I would caution anyone from making a purchase strictly for the tax credit.
I will be sharing more my personal decision to buy and the lessons I am learning throughout the process in the newsletter. I just gave it a new title: The Rest Area. I you haven’t subscribed, you can do so using the form on the right, or directly below this post.
What about you?
Are you in the market for a new home? Did the tax credit affect the timing of your decision?
{ 10 comments… read them below or add one }
I need to find out if we can afford to retire. He is 74 years old. We own a house and still owe $78,000 . Can you refer us to someone that can help us on this issue? thank you
Regardless of the degree that the credit pulled sales forward, it certainly added too much ‘froth’ and caused prices to increase (i.e. to price in that credit). So, with that artificial price bump, the tax credit not only delayed the inevitable, it actually exacerbated the RE market. An abject lesson in the foly of government meddling in markets!
BF and I refuse to buy a home, notwithstanding the immense amount of pressure we’re getting. Our incomes, put through the metrics, say we can afford it; our reality says we can’t. We got the same pressure when graduating from grad school–oh rates are so low right now you HAVE to buy. That was in 2005…enough said :D.
It is SO IMPORTANT to know what YOU can afford, how this decision impacts every other area of your life, and how you’re going to work through it. It’s awesome for people who were planning to buy anyway, but the $8,000 credit isn’t enough to compensate for the real estate tax and maintenance and furnishing that I’d be solely responsible for. You broke this down so nicely!
Ronnie,
Good for you for staying grounded! Buy when it is right for YOU!
You are so right Lakita. You definitely should not rush into buying a house just to get the $8,000 tax break. Houses are really expensive.
I hate when the government picks winners and losers like this. Why give $8,000 to someone who happens to be buying a home this year. What about the poor chump whose taxes are paying for that giveaway? Worse yet, that chump might have purchase his home four years ago at the top of the market. Now he is out of the tax break, his taxes are going to pay for someone else’s home, and his home value is underwater. We need to stop playing these games with taxpayers’ money.
.-= TheDebtHawk.com´s last blog ..Opening a Simplified Employee Pension Plan (SEP) To Lower My Taxes =-.
It didn’t dictate our decision to purchase our first home, but it definitely was a blessing. But I think folks still need to be cautious, since home prices are still overinflated in some areas. It might be wiser to wait, if they can.
.-= RainyDaySaver´s last blog ..Declutter Your Life: Stuff vs. Memories =-.
We benefitted with the tax credit…we built first residence in July 2009..we had already decided to build prior to the tax credit…great timing it turns out. We think the check is coming this week (fingers crossed).
.-= Ken´s last blog ..Is Permanent Insurance Ever Beneficial? =-.
I fully agree with how you’re presenting this Lakita. The credit should never drive anyone into something they aren’t ready for or can’t fully afford.
It was the give away lending of the early 2000s–subprime, zero down, 1% initial rates, etc–that caused so many to take leave of their senses and buy something they couln’t afford.
At a minimum, we all should have learned a painful lesson from that experience.
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Awesome advice to “not let the tax credit dictate your timeline.” My wife and I were already planning on buying so the timing has been a great blessing to us. I know too many people who are scared to pass up this chance even though they’re in a terrible position to buy a house.
For the record, I closed at the end of September, filed my 1040-X for the refund in early November, and still have no tax credit! Gotta love government 🙂
.-= Deacon Bradley´s last blog ..What Web Startups Teach Us About Winning with Money =-.
Deacon Bradley,
It’s great if the opportunity falls within your timeline, but your right….too many people are looking to buy for the refund. While the $8,000 may look enticing…and it’s meant to….the reality is you are spending an unplanned 90% to get a 10% credit.
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