Ed's Blog

Thought I'd post this as aa shorter version of the long tax credit explanation that I previously posted. This is one of my newspaper columns:

Where’s The Catch With The Home Buying Tax Credit?

Q: I’ve heard about the $8,000 tax credit for first time home buyers, and it’s definitely got me interested, but there’s got to be a catch. What is it?

A: There is no catch per se, but there is naturally, some fine print. To begin, the $8,000 tax credit is the maximum amount you can receive. The way this incentive is written is that you’ll receive a tax credit of 10% of the purchase price, up to a maximum of $8K. (Of course, here in the Bay Area, the $8K is pretty much guaranteed).

However, the tax credit isn’t available to everyone. As a single person, you are only eligible for the full credit if you make less than $75,000 per year or less than $150,000 per year for couples. Please note; you may be able to get a partial credit if you make more than that, but there is no guarantee. You also need to know that “new home buyer” in this case means that you can’t have owned a home (even as an investment) during the last three years.

You should also be aware that once you purchase the home, you need to live in it for at least three years, or you may be forced to return the credit. That means that this credit won’t apply if you plan to rent out your home, or use it as your secondary residence or vacation home. Finally, the home must be purchased before November 30, 2009 in order for you to be eligible.

So, while there is no catch, there are clearly a few stipulations that must be met. However, this new incentive is definitely a step in the right direction towards bringing more buyers into the market. Even without this incentive, it’s a magnificent time to be a buyer. There remains a great selection of homes currently for sale, not to mention interest rates continue to remain at historic lows. So this tax credit is really just an added bonus for those whose are ready to buy a home. Happy house hunting!