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New $8,000 Tax Credit signed by President Obama

Posted by UtahCribs, Real Estate, Homes on February 17, 2009

Differances in Stimulus Plans

Here is some information for you all about the tax credit that first time homebuyers get with the signing of the new stimulus package. Please call us if you have any other questions regarding this!

The Stimulus Plan was signed into law by President Obama today. It contains a new tax credit for first-time homebuyers. Essentially, first-time homebuyers within certain income limits who purchase a home in 2009 before December 1, 2009 will receive a tax credit of up to $8,000. The program is similar to the $7,500 tax credit which applied to home purchases made in 2008 after April 9. A comparison of the two credit programs is outlined below.

While the Stimulus Plan was still being debated, the Senate version originally included a $15,000 tax credit for all homebuyers. To lower the cost of the Stimulus Plan, the final version of the Plan contained this smaller tax credit, and this tax credit is applicable only to first-time homebuyers.

To qualify as a first-time home buyer as defined in the programs, the purchaser (and the purchaser’s spouse) may not have owned a home in the three years prior to the purchase date of the home. Single family homes qualify for the program. The home must be the primary residence.

Both tax credits are subject to the same adjusted gross income limitations (full credit for AGI less than $75,000 single/$150,000 joint, phased out for AGI up to $95,000 single/ $170,000 joint).
The amount for either credit is the lesser of 10% of the home purchase price or $7,500 or $8,000, as applicable.

While a purchaser still owns the home, the $7,500 credit must be repaid in equal payments over a period of 15 years, starting with the 2010 tax filing. The $8,000 credit will not need to be repaid. Again, the $7,500 credit needs to be repaid, while the $8,000 credit does not!

Upon sale of the home, any portion of the $7,500 credit not yet repaid is due in full.  No portion of the $8,000 credit is due upon sale of the home, if the home is owned for more than three years.  If the home is sold within the first three years, the full amount of the credit is due upon sale.

The $7,500 credit was not available to any purchaser utilizing state/local revenue bond money to help finance the home purchase. There is no such restriction on the $8,000 credit.

Under both the $7,500 and the $8,000 programs, the credit will be claimed on the purchaser’s income taxes. Any amount in excess of taxes owed will be refunded to the purchaser.

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9 Responses to “New $8,000 Tax Credit signed by President Obama”

  1. spencerjanke said

    This is huge for a lot of people who have been waiting for Obama to do something big. Tell all of your friends and family who are first time home buyers, they should take advantage of the credit and the extremely low interest rates. We had another first time home buyer lock today at 5% fixed… Crazy!!!!

  2. Brad Miles said

    Hopefully people realize that this really is one of the best times to buy, EVER. With historically low interest rates, home prices falling, and now this tax credit, this could be a first time homebuyer’s chance to pick up an investment that will be the stepping stone to other real estate deals in their lifetime.

    I heard a professional real estate speaker talk the other day about how you make your money when you buy a property. If you buy right you’ll sell right. If you buy wrong, you’ll probably sell wrong too. This is what has unfortunately happened to people who bought right as the market was peaking and prices were climbing. They now cannot sell for a profit or even break even, however I believe those who are able to buy right now are going to be really happy with their purchase for years to come. When have prices ever fallen like this with such low interest rates and now an $8,000 tax credit that doesn’t need to be repaid?

  3. Interested...may I disagree? said

    Seems things are typically not as good as real estate agents always tell us. On the way up it was the “perfect” time to buy, and apparently the msg is the same on the way down. Checks out the facts below for data driven insight into how the knife is falling. We are not even talking about the credit card crisis that is sure to come soon enough. Bottom line: not is NOT a good time to buy; the country is in too much debt and people are still saying that “it is all good.” Amazing

    Home construction drops far more than expected
    New home construction falls to annual rate of 466,000 units in January, record low

    * Martin Crutsinger, AP Economics Writer
    * Wednesday February 18, 2009, 12:19 pm EST
    * Yahoo! Buzz
    * Print

    WASHINGTON (AP) — Construction of new homes and applications for future projects both plunged to record lows in January as all parts of the country showed big declines in building activity.

    The Obama administration, seeking to combat the most serious housing downturn in generations, on Wednesday unveiled an effort to deal with mortgage foreclosures to go along with housing support included in the $787 billion economic stimulus program. But analysts said they still do not expect a turnaround in housing until late this year at the earliest.

    The administration’s new foreclosure relief plan will spend $75 billion in an effort to prevent up to 9 million Americans from losing their homes. The plan also will double the size of the lifeline the government is providing Fannie Mae and Freddie Mac to $200 billion each as a way of reassuring financial markets of the viability of both mortgage finance giants.

    The Commerce Department reported Wednesday that construction of new homes and apartments dropped 16.8 percent last month to a seasonally adjusted annual rate of 466,000 units. That’s well below the 530,000 units economists expected, and was the slowest pace on records dating back a half-century.

    Applications for building permits, considered a good barometer of future activity, also dropped to a record low, falling 4.8 percent to a rate of 521,000 units, slightly below economists’ expectations.

    “Conditions in the market for new homes have not been this bad since the 1930s and they continue to worsen,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., who predicted that housing starts would remain depressed for months to come.

    Builders are slashing home construction as skyrocketing home foreclosures dump more empty properties on an already glutted market. The reduction in new projects should aid the housing market in the long run as fewer properties for sale help increase competition and stabilize prices for those left on the market.

  4. Thanks for the input. With all of the news that is coming out, it is good to get another opinion.. I think we all agree, it is an interesting time and to be perfectly honest who knows what will happen. One thing is for sure we all hope we pull out of this mess we are in sooner than later..

  5. To Mr. Disagree-

    That is a very pessimistic way of looking at things. Do you always leave your glass half empty before bed? I’m sure we all appreciate your input and alternate opinion, but REALLY?? Do you have to think of it this way?

    I work a project in Southern Utah, and we have pulled 20+ building permits in the last 15 weeks.
    We wrote up 10 Real Estate Purchase Contracts in a matter of 10 days-(Feb 13-Feb22) with a minimum of $300,000 as the price tag. None of these were foreclosures or short sales. ALL new construction.
    One of our builders pulled 13 new (different from the 10 REPC’s we wrote up as agents) custom home build jobs in that same 10 day period. That is enough to keep an entire construction company with 2 superintendants in business for the entire year. Each of those homes in the million dollar range.

    It IS a great time to buy. IF you have the money to do so. Out of all the contracts my brokerage has at this moment…not one is a conventional loan. Most cash, and a few other anomalies.

    “Seems things are typically not as good as real estate agents always tell us. On the way up it was the “perfect” time to buy, and apparently the msg is the same on the way down.”
    If the market is a roller coaster their is only one certain thing…It is always a good time to buy. It just depends on how long you are willing to wait to sale.

    • Thanks for the comments from the GRASS ROOTS. Seems like those who pay attention to ONLY the news think it’s “horrible out there.” THEN, those of us who “do it for a living and see it daily” know from 1st hand experience that things are really picking up! Glad to hear St. George did well at the home show– I personally own property there and it’s great to see it on the mend. Also, for you readers out there, this last post was from the agent selling the development at Sand Hollow Golf Course in Southern Utah……a wonderful place. If you are interested in what they have to offer let me know and I will put you in contact with him. Thanks— Jake Breen

  6. May I Disagree? said

    I agree that a place may be a nice place to live, but anyone who thinks that it is “always a good time to buy” as the individual above indicates is either severely diluted, or is probably making money on transaction volume. This is the problem that I have with most real estate agents. I know some that are very smart (I think Jake is well educated–MBA and all)….

    However, with an MBA, you should get significant training on agency conflicts. As soon as an agent steps ups and will take his fee on the long term (i.e. as a percentage of my value appreciation over time), I will pay him. However, right now, I just don’t think that there are many agents worth listening to (even the smart ones) because they are too conflicted. I can guarantee you that this “glass is half full” garbage that the poster above mentions will put you in the poor house if you let the guys that are getting paid off your transactions “half full” you into doing something. C’mon. Let’s talk about business fundamentals. From a finance perspective, stock is worth your share of the discounted future cash flows of a business. On a housing perspective, it should be much the same. However, the cash flows are what you can make in an average salary in the area. If unemployment is rising, jobs are paying less, and there is huge vacancy in the market, the fundamentals do not say that it is a good time to buy; that is UNLESS you get a deal that is so good that the fundamentals work. This is the case for VERY few people now-a-days. So, spare me the “Do you always leave your glass half empty before bed?” retoric, because it has no data behind it.

  7. Katie said

    This is a good clarification of the tax credit. I have a hard time believing that a tax credit for ALL homebuyers (instead of just first-timers) would not have been fiscally worthwhile in helping the housing economy…I’ve owned my house for 5 years, and it I know it would have motivated me to get in the game.

  8. A believer in the Invisible Hand said

    In all markets — stocks, bonds, commodities, real estate, etc. — the best time to buy is when prices and transactions are down. Those who wait for the bandwagon are those who lose. Record low new home construction simply means that inventory (supply) is going down. The law of supply and demand has held true throughout the history of free markets, so when supply drops, prices go up. Adam Smith was right on — the invisible hand of free market capitalism will prove itself, even in this time of turmoil.

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