Uncle Sam is giving home buyers and homeowners 2 new tax incentives.
The Housing Act was signed on July 30, 2008. Here are the two incentives you should know about:
1. Temporary New Homebuyer Tax Credit
Qualified buyers will receive the lesser of 10% of sale price or $7,500 tax credit ($3,750 if married and filing jointly). This tax credit is refundable which means you can use it to offset your entire regular federal income tax liability plus receive the difference from Uncle Sam should the credit exceed your tax bill.
The credit applies only toward a purchase of a primary residence and is good from April 1, 2008 until July 1, 2009.
This is not a grant but, an interest free loan from the Government.
Home buyers have up to 15 years to repay the tax credit. So, if you take advantage of the maximum credit of $7,500 than you will have to pay back $500 per year ($7,500/15 years =$500). Unless you die first, or you sell the home, in which case you would have to pay at tax time of the year the sale occurred.
2. Temporary New Property Tax Deduction for Non-itemizers
If you're unmarried you get to add $500 toward your deductions for local and state property taxes. If married, the deduction increases to $1,000. However, you can't deduct more than you actually pay in state and local taxes.
