First Time Home Buyers in RI benefit from Tax Credit

While I was conducting open houses this weekend, I had some interesting discussions with first time home buyers and agents about the $7500 tax credit offered by the government.  There was a bit of confusion and speculation about the $15,000 credit proposed by the U.S. Senate.  So as of today, here is an explanation of how the current credit works and what is proposed, but not yet passed.

Right now, there is a $7500 tax credit available to certain first time home buyers- it works like this:

Available to: First Time Home Buyers who have not owned a primary residence in the last 3 years

Limited to: 10% of purchase price or a maximum of $7500

Adjusted Gross Income Limits: Single - $75,000; Married $150,000

Applies to: Purchases made between April 8, 2008 and July 1, 2009

Essentially, this is an interest free loan from the government.  It must be paid back over a 15 year period or at the time the house is sold.  After a 2 year grace period, the homeowner must pay back the loan.  If they pay it back over 15 years, they would pay $500 on their tax return each year.  If the house is sold before the loan is repaid, the homeowner must pay back the IRS.  

Here is a link to the IRS website explaining the credit: http://www.irs.gov/formspubs/article/0,,id=203083,00.html

 At the same time, there is another proposed tax credit on the table which is included in the Senate version of the stimulus bill.  This would provide for a tax credit of up to $15,000 for buyers of primary residences.  This bill is scheduled for a vote tomorrow.  Once the Senate passes its version of the stimulus bill, the House and Senate versions will go to conference, where House and Senate versions will be reconciled. We will be keeping an eye on how the final version of the bill treats real estate issues and report back.

So for now, what we know is that $7500 is available to home buyers as an interest free loan to qualifying individuals.  The difference between the current plan and both programs being considered by the House and Senate is the treatment of the credit as a loan to be repaid (the current program per the IRS link above) or an outright tax credit, not to be repaid.  Either way, an interest free loan, or a hunk of money is good news for first time home buyers. 

Stay tuned for more information on this stimulus program and how it affects first time home buying in Rhode Island.  

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