common misconceptions about the federal government's tax credit for first time home buyers:

Real estate agent Michael Maher joined FOX 4 Wednesday morning to clarify the most common misconceptions about the federal government's tax credit for first time home buyers:

1. It's only for people who've never bought a home. False! If you sold a home in the past and rented for the last three years, you may qualify.

2.It has to be paid back. False, this is a tax credit. You will receive a check from the federal government four to six weeks after you complete the form at the closing of your home purchase.

3.It's a lengthy and difficult process to get the tax credit. Fase, it's just one form you have to fill out for the IRS.

4. You can use the tax credit for your down payment. False. Some lenders offer some programs which require you to sign over your credit to them, but be very cautious about these. Read all the fine print! Technically, the way the program is structured, the money is not for your down payment.

Again, you do not receive the money at closing. You will receive it four to six weeks after closing.

5. There's plenty of time left to buy. False. You must close on or before November 30th, 2009, to take advantage of the tax credit. Remember that closing on a house takes 30 to 60 days. Leave yourself plenty of time for the inspection, title search and document preparation.

You can find out if the tax credit will work for you at a free seminar, Friday, Aug. 14, at 4 p.m., at the Overland Park Convention Center. To register, call 1-800-441-7699, EXT. 4664

Copyright © 2009, WDAF-TV

You might be ablt to use tax credit ($8,000) IMMEDIATELY!

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit HUD's website.

what is the difference between a tax credit and a tax deduction?

A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 tax credit would owe nothing to the IRS.

A tax deduction is substracted from the amount of income that is taxed. Using the same example, assume the taxpayers is in the 15% tax bracket and owes $7,500 in income taxes. If the taxpayer receives a $7,500 deduction, the taxpayer;s tax liability would be reduction by $1,125 (15% of $7,500), or lowered from $7,500 to $6,375

Tax Credit - Refundable...

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owned)

First Time Home Buyer Tax Credit

For aspiring home owners who find their goal stubbornly elusive, newly enacted legislation proving a tax credit of as much as $7,500 for first time home buyers might just be the opportunity of a lifetime.

but like so many of the good things in left, time is of the essence for buyers who want to take advantage of this outstanding opportunity. Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible.

Please read on about detailes of this legislature the next feww days...

First-Time Buyer Tax Credit: A Reason to Buy Now

Daily Real Estate News | October 8, 2008
First-Time Buyer Tax Credit: A Reason to Buy Now

The homeownership tax credit that the federal government created earlier this year is a hard-won tool at your disposal to encourage your customers to jump off the fence and get into the home buying market.

When you combine the tax credit with today’s continuing low interest rates, large selection of for-sale inventory, and low home prices, many of the pieces are in place for your customers to buy now.

How the Tax Credit Works

The First-time Home Buyer Tax Credit was passed this year as part of the Housing and Economic Recovery Act (H.R. 3221) on July 30 and targets any individual or household that hasn’t owned a home for at least three years. Taxpayers can take the credit on their 2008 tax return if they bought their house this year after April 9.

It’s worth up to $7,500 and can be taken in a single tax year. Authorization for the credit ends July 1, 2009, so if your customers wait to buy in the first half of 2009 they can take the credit on their 2009 tax return.

The actual credit amount is set as a percentage of the home purchase amount. That percentage amount is 10 percent, so your customers can get 10 percent of the home price credited against their tax liability, up to a maximum $7,500.

Income limits are $75,000 for individuals and $150,000 for households. Individuals whose income exceeds the $75,000 limit but isn’t more than $95,000 can still take the credit but on a reduced basis. The same thing applies to households earning up to $170,000.

Any house is eligible as long as it’s a primary residence and is in the United States.

Buyers Have 15 Years to Pay Back

To help keep the program cost effective for taxpayers, the federal government requires the tax credit to be paid back in small, 6.67-percent increments over 15 years. For that reason, some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable.

There’s one restriction on the type of financing that your customers can use if they plan to take the credit. That restriction is on tax-exempt mortgage financing. That only applies if your clients are using below-market interest-rate financing from a public agency or nonprofit that’s funding the loan using proceeds from a tax-exempt mortgage-revenue bond issue. For most buyers, this won’t be an issue. It’s mainly an issue for low-income buyers using special mortgage financing.

Be a Resource for Clients

NAR Government Affairs has created two helpful documents that you can share with your clients to help them learn more about how the tax credit works. The documents are on downloadable and printable PDFs:
First-time home buyer tax credit chart
First-time homebuyer tax credit FAQ

The IRS Web site also offers tax-credit guidance in an article that provides answers to many frequently asked questions.

And don't forget about REALTOR.org, which is a great source for more information on all aspects of the Economic Stimulus Bill passed July 30.

How the New First-Time Buyer Tax Credit Works

How the New First-Time Buyer Tax Credit Works
Under the new housing bill, home buyers who have not owned a home in the last three years will be eligible for a tax credit equal to 10 percent of the property up to a maximum of $7,500. Here’s how it works:

* The credit is $3,750 for married couples filing separately. Unmarried people who jointly purchase a home will be able to divide the $7,500 credit.

* This program is actually a loan, which home buyers must repay over 15 years at zero percent interest beginning in the second year after they purchase the home. A home buyer who qualified for the whole credit would pay $500 for 15 years or about $41.67 per month.

* The credit applies only to homes purchased on or after April 9, 2008, and before July 1, 2009.

* High-income home buyers don’t qualify: Eligibility begins phasing out for single filers with adjusted income of more than $75,000 and $150,000 for joint filers. It completely phases out at $95,000 for singles and $170,000 for married couples filing jointly.