Last quarter for tax breaks

Register Reporter

Potential first-time homebuyers have until Dec. 1 to take advantage of a special tax credit that could put as much as $8,000 back into their pockets.
The credit — passed as part of the federal stimulus package — allows first-time homeowners to recoup up to 10 percent of their house’s cost, capped at $8,000. Thus, a house purchased at $70,000 would be worth a $7,000 tax credit.
“It’s essentially free money,” noted local Realtor John Brocker. “But we don’t know if it will last.”
That’s because Congress set the program’s deadline for Dec. 1 with no assurances that it will be extended.
“We thought it would be extended to the rest of the year, but this health care business is getting out of hand,” Brocker said, referring to the ongoing negotiations between President Obama and Congress.
“And people from Congress have told us that until the health care debate is taken care of, there will be no other programs under discussion.”
The looming deadline likely will mean a particularly active housing market in September, October and November, Brocker predicted.
“You can’t be completing the paperwork on Dec. 1,” Brocker said. “You have to close by Dec. 1.”
Congress initially enacted a $7,500 tax credit in July 2008 as a mechanism to decrease the over-supply of homes for sale.
There was a notable catch, Brocker said. The $7,500 credit in the 2008 plan must be repaid, interest-free, over the next 15 years.
Congress modified the plan in January, expanding the credit to $8,000 and stipulating that it did not have to be repaid.
Only first-time homebuyers are eligible. A person is considered as such as long as he has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.
There are income restrictions as well. A single homeowner cannot earn more than $75,000 to qualify for the full credit. Joint incomes are capped at $150,000.
“There are partial credits if you earn more than that,” Brocker said. “But most first-time homebuyers aren’t likely going to have to worry about that.”
The credit also goes toward those who have tax liabilities, Brocker explained.
For example, if a homebuyer owes $1,500 in income taxes, but is qualified for the full $8,000 tax credit, he would receive $6,500.
The money will be received within 30 days or so after a taxpayer files a 2009 tax return, Brocker said.