First time Home Buyer Tax Credit.

The Program:

As part of the massive so-called foreclosure rescue bill signed by the president recently, the first time home buyer credit has received a great deal of press but little discussion.
First time home buyer means someone who has not owned real estate in the last three years. This is important for qualification purposes.
There is an income limit that goes with the program: if a couple of first time home buyers makes over $150,000, it will not qualify for the tax credit.This limit is $75,00 for a single individual.
The amount of the tax credit is $7,500 for a couple or $3,500 for an individual.

How the tax credit works:

If a qualified first time home buyer acquires a property between April 9, 2008 and July 9, 2009, he will be able to deduct up to the maximum allowed from his tax liability. This is a great benefit because it reduces the tax liability, dollar for dollar. Remember that deductions from income only affect the taxable income, and the rate of taxation, not the amount of taxes owed directly.

Pay back period: 15 years.

This tax credit is not a grant, it is in fact a loan. the one time benefit will have to be paid back, if the owner sells the property and makes a profit during the first fifteen years of ownership. The pay back will be prorated. The beneficiary has to pay 1/15 of the credit back each year that they own the property until either they sell or settle the "loan".
It will cost $500.00 a year for a couple that has qualified for the full benefit.

The Impact:

The opinion is widely divided as to the impact of this program. Some see it as a means of boosting sales of homes to first time home buyers, while other see its impact as negligible. Who is right remains to be seen. It is clear that the program does not help people buy homes and in fact it creates more debt. Beneficiaries of such largess usually forget the implications of their commitment a few years later. They forget to pay back, or they do not remember that they owe the funds.
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