SFGate 8/3/08, How Home Purchase Federal Tax Credit Works:In order to stimulate the national housing market, Congress is offering this incentive to encourage buyers to buy before the June 2009 deadline. It is money you will need to pay back. Still, time is money and since you can use it now and pay it back in the future without any interest or fees; there is real value to the credit.
(08-03) 04:00 PDT Washington -- Anybody who's been sitting on the sidelines hesitant to jump into real estate until conditions settle down should know these dates: April 9, 2008, through June 30, 2009.
They mark the eligibility time to qualify for the home purchase tax credit created by the massive housing bill approved by Congress. If you have not owned a house during the past three years - or are considering buying your first home - and can go to closing before the end of next June, you may be eligible for up to a $7,500 credit against your federal taxes for 2008 or 2009 ($3,750 if you file taxes as a single person).
At its core, the new tax credit functions very much like an interest-free loan for up to $7,500. You pay the principal back in increments over time, but there's no interest charge to you.
Rob Dietz, an economist for the National Association of Home Builders, says the new credit not only will pull first-time buyers into the market, but also have a powerful multiplier effect, as thousands of sellers of these credit-assisted houses go out and purchase replacement homes for themselves - extending the impact of the credit into the move-up segment.
How do you claim the credit? If you pass the eligibility tests and buy before June 30, you simply request the credit on your tax return for either 2008 or 2009, which will be modified for that purpose. Even if you purchase in 2009, you can take the credit against your 2008 taxes by filing an amended return.
For an overview of the credit see the SFGate article (click here), or go to www.federalhousingtaxcredit.com.