Maybe you heard that Uncle Sam, who has been giving money out to just about EVERYBODY lately, has a check waiting for you... if you buy a house before next summer!
What is it? How does it work?
This is a tax credit and not tax deduction. It is a true dollar for dollar reduction on taxes owed.
The credit can result in a true tax refund! If, for example, you were to get back zero on your 2008 taxes and you qualify for the full $7,500 credit, you would then receive a tax refund for $7,500.
The tax credit is essentially an interest-free loan. You will repay the credit to the government $500 per year over 15 years or when the house is sold.
If the profit you receive when selling your home is less than the remaining amount you owe, the discrepancy will be forgiven. For example, if $5,000 was still owed and the sale of the home only generated $4,000 profit, then the remaining $1,000 shortfall would be forgiven and you would not have to repay the government.
If you take the credit in 2008, the first $500 payment would need to be made when you
file your 2010 tax return.
To find out if you qualify for this $7500 - click here.
While you won't receive this check until you file your taxes... you might want to get a gift from a family member - and use that gift money to purchase a home, or to help with closing costs! USDA and VA loans do not require downpayments - but there are costs involved with moving, and paying for homeowners insurance, and normally those costs will add up to 2 or 3% of the purchase. FHA guidelines change at the end of 2008, and the downpayment goes up to 3.5%!