We need good news. So here it is – good news that also has potential to stimulate the economy. You will recall that the Housing Assistance Tax Act of 2008 contained, among other things, a first time home buyer tax credit of up to $7,500. The good (and stimulating) news today is that the first time home buyer tax credit,which was not really a credit because it had to be repaid, was improved upon with the passage of the stimulus plan. The credit was increased slightly, to as much as $8,000. But the real improvement is that the new version is a real credit. It does not have to be repaid as did the original. And you all know that a tax credit is different than a tax deduction. A tax deduction of $8,000 might only save $1,000 or so. But a tax credit saves the full $8,000. So if a first time home buyer owes $10,000 in taxes, they can receive a credit of $8,000 and owe only $2,000. And an even more exciting thing about this new tax credit is that it is refundable, which means that first time home buyers can receive the full $8,000 even if they owe notax at all. Essentially the credit allowed is 10% of the purchase price to a maximum of $8,000 and is phased out as income exceeds $150,000 for a couple or $75,000 for single taxpayers. There’s a precise formula for figuring all of this. We do not give tax advice. We do encourage readers to consult with their own tax advisor. This is just a heads up story.Want some more good news? California taxpayers can receive a tax credit of up to $10,000 if they purchase a new home from March 1, 2009 to February 28, 2010. This is part of the (finally) adopted state budget. $100,000,000 is available within the program and tax payers are on a first come first serve basis. The credit can be applied at $3,300 per year for three years against state income taxes owed. Again, consult with your tax adviser on this.
Want even more good news? Remember the temporary high balance conforming loan limit of $729,750 that expired December 2008 and dropped to $625,500? The stimulus package raised it back up to $729,750 for all of 2009. As you may know, even though these high balance loans are included within FannieMae and Freddie Mac’s conforming designation, they bear higher interest rates than the traditional $417,000, loans. But even these higher rates they are significantly lower than jumbo rates.
