First-time homebuyer tax credit: Be ready to pay

Working class individuals who claimed the $7,500 first-time homebuyer tax credit two years back need to get ready to pay come tax day 2011, states the Philadelphia Inquirer. On Monday, April 18, the first of fifteen annual payments is due on that loan. Source of article – First-time homebuyer tax credit: Get ready to pay by MoneyBlogNewz.

How the first-time homebuyer credit worked

There were many home buyers able to get a fantastic tax credit in the United States These buyers could get a maximum of $7,500 for 10 percent of the home purchase price. The tax credit could be divided by unmarried homebuyers or married individuals filing separately could get $3,750 each, according to the House and Economic Recovery Act of 2008. The credit applied to homes purchased after April 8, 2008, but before January 1, 2009.

As you can imagine, this first-time home buyer tax credit proved to be wildly popular. However calling it a “credit” was always problematic, as it was actually an interest-free loan. These homebuyers eventually will be repaying the government. This could be done in installment payments yearly for 15 years. Someone who gets a credit of $7,500 will end up paying $500 a year. This is not charged if the house is sold quickly though. At that point, the entire remaining amount comes due right away.

The homebuyer tax breaks given

The first-time homebuyer tax credit was not the only thing Congress did. There were two other tax credits extended. Any first time home buyers that signed contracts between January 2009 and April 30, 2010 got an $8,000 credit. As long as the contract had been signed by April 30, the sale might be completed by September 30, 2010, and the taxpayer could qualify for the credit. There was also a $6,500 credit available. This was for long term homeowners that bought, between Nov 7, 2009 and April 30, 2010, a new or existing home.

The tax credits, whether it be for $8,000 or $6,500, had to be repaid by the homeowners if the home is sold within three years of purchase or if it is a secondary residence. It is easy to sell within three years nevertheless. There are ways around it. The home buyer only need to repay what the profit is if the home buyer makes a profit on the sale of the home.

Issues in the IRS

Numerous glitches that impacted tax refunds for married couples filing joint returns have caused aggravation for the IRS, writes the Inquirer. With the Form 5405: “First-Time Homebuyer Credit and Repayment of the Credit,” many filed before February 22, 2011. That means manual returns were required taking a long time to process.

IRS projections indicate that about 1 million United States households will be repaying the $7,500 first-time homebuyer tax credit. You are able to go to IRS.gov and look at the “Where’s My Refund?” link to find out more if you do not have your refund.

Information from

Housing and Economic Recovery Act

frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h3221enr.txt.pdf

IRS

irs.gov/newsroom/article/0,,id=204671,00.html

Philadelphia Inquirer

philly.com/philly/phillywomen/119915874.html

How Canada helps first-time home buyers

youtube.com/watch?v=lg_i8SRhMO0