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First-Time Buyers Rejoice-Tax Credit and Tax Deductions Await

June 3, 2009

First-time buyers in Tangipahoa Parish can rejoice with a tax credit that is better than a tax deduction.  As a matter of fact, first-time buyers will be allowed to take advantage of both a tax credit and a tax deduction.  But this will only be available this year and only for a short time.

Tax Credit and Tax Deduction:

    * A tax credit is subtracted from the amount of money you owe at tax time, resulting in a dollar-for-dollar savings.
    * A tax deduction is subtracted from your gross income.
    * A $1000 tax credit will reduce the amount of money you owe by $1000.  If you owe less than $1,000, you get the balance in the form of a refund.
    * A $1,000 tax deduction will decrease the tax owe you owe by about $10.

First-time Home Buyers Tax Credit Applies to 2009 Only:

    * First-time home buyers can take advantage of a tax credit when they buy a home this year.  But, be aware that the tax credit will end on December 1, 2009.  The escrow on a home purchase must close no later than November 30.
    * First-time home buyers are eligible for a tax credit up to $8,000 (or 10% of the purchase price).
    * First-time home buyers can tax advantage of the tax credit in two ways:

  • As a tax credit when they file their 2009 tax return.
  • As a supplemental down payment and/or help to pay closing costs.  This applies to FHA loans only.

First-Time Buyer Tax Credit Advantages:

    * Need less funds to close when financing a home through the FHA loan program.
    * Owe less money to the IRS when filing 2009 tax returns.
    * If elect to use the tax credit for a supplemental down payment or loan costs but do not need the full tax credit, the balance will be applied to your 2009 tax filing or will be refunded to you.

New Homeowners Tax Deduction:

    * All new homeowners are allowed an important tax deduction, which is often overlooked.
    * New homeowners can deduct any points paid when they purchased their home.
    * This is a one-time tax deduction and can only be applied to the year the home was purchased.
    * You must have a Form 1098 from your lender.

Homeowners Tax Deduction:

    * All homeowners can take advantage of this tax deduction.
    * There is no expiration or time limit.
    * Homeowners are allowed the benefit of deducting the interest paid (in the previous year) when filing their tax returns.
    * You must have a Form 1098 from your lender.

The real purpose of this blog is to let first-time home buyers know that there is a reason to rejoice when buying a home in 2009.  Buyers will certainly rejoice in their pride of ownership and their sense of accomplishment but they will be able to rejoice when taking advantage of the tax credit and tax deductions that await them.

Caveats:

    * The tax credit is for this year only and will soon be disappearing.
    * When filing taxes, it is always best to consult a professional tax consultant.
    * Consult with an FHA-approved lender for information on how to apply the tax credit when using FHA financing.

Yvonne Martin, the Martin Team, Let Our Family Bring Your Family Home

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