Oct. 22, 2009

What is the $8000 Tax Credit?

The $8000 first time buyer tax credit has gotten a lot of attention in recent months. If you're reading this, you probably already know that, I guess. You are obviously capable of operating a computer and navigating the internets... So, if you are curious about the $8000 tax credit, and like stick figures, have a look at this video. I didn't make it, but I like the style. It's a little cheesy, but it explains the meat and potatoes of the tax credit in a way that even your dog can understand. Trust me, I tested it with mine. It took him a few tries, but he got it...He's not much of a reader, but he's pretty good listener.
So basically, if you buy a house, you get to save $8000 on your taxes next year. It's not a down-payment bonus, but it works out to saving you up to about $667/month for the first year. That's probably pretty close to making up the difference between paying rent and paying a mortgage.  Actually, given other ownership-related deductions for property taxes and interest, you'd probably come out ahead...unless you currently rent a penthouse suite and decide to buy a trailer.
Several lobbying groups, including the National Association of Realtors,  are strongly advocating the extension of the tax credit well into 2010. However, at the moment there is no guarantee.  My guess is that Congress will probably extend the credit, though they are going to sit on it until the last minute for dramatic effect. Sounds like pretty standard practice. The headlines will be bigger if there's a serious deadline involved.

My two cents:

The tax credit has it's pros, cons, and far-reaching economic consequences that are unknown and hotly contested. However, there is little doubt that it is of great benefit to the individual buyers to whom it is offered.  My #1 job as a Realtor is representing prospective buyers and getting them into homes they will be happy with. I don't get involved in their finances, except to the extent that I need to in order to help them through the transaction. However, it is tremendously important to me to make sure that buyers are as educated as possible before they begin the process.

  • Update: Congress has voted to extend the tax credit to include transactions written by April 30th and closed by June 30th, 2010. They credit applies to individuals who make up to $150k/year and couples who make up to $250k.  The maximum purchase price is $800k. They've also added a $6500 tax credit for those buyers who've owned and lived in a home for at least 5 out of the past 7 years.

This post simultaneously published by Rob LeRoy at theRealEstateNovelist.com

Rob LeRoy is a Seattle real estate agent and social media marketing coach with eXp Realty.

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