"Getting a lump sum was kind of cool, especially when you're not used to that amount being deposited in your account," Thomas says. The Rheas were already looking for a home before the much-hyped tax break was announced. But after they became aware of the credit, they quickened their house hunting pace; Thomas estimates they doubled their frequency of home viewings.
"We started beating the pavement," he says. They found a place in Greenville, not far from where they'd been renting for about two years. Initially, Melissa thought the policy took $8,000 off their loan price, closing costs or other fees. When she learned of the actual process, it remained a killer opportunity. "It really eased the stress in a time that's all about money," says Melissa, 26, a pediatric occupational therapist.
The Rheas used the tax credit money to purchase a lawn mower, leaf blower and other lawn equipment, something they need now they have their own yard. They also picked up some patio furniture and a dining room table. (The Rheas got their money this year because they filed an amendment to their 2008 taxes. Most buyers will benefit from the tax incentive on their 2009 tax return.)
"Without the tax credit, we probably wouldn't have been able to buy those things without saving a year or two," Melissa says. "We'd been married for less than a year and didn't have the money for yard equipment."
Melissa is psyched about building up equity: "It's awesome to own something. I hate thinking of the money we threw away in rent." Meanwhile Thomas has thrown himself into yard work. "Having something to do on the weekends besides just lay around is nice," he says.
Twenty-eight year old teacher Mandy Copp and her husband, network tech Adam Copp, have just begun shopping for a home. In the meantime, they're renting a townhome-style apartment close to downtown. "We definitely want to take advantage of the $8,000 credit before it's discontinued on Dec. 1," Mandy says. "Because we're living paycheck-to-paycheck at the moment, we can't afford to save. The tax credit would give us some breathing room and help us move our life forward."
Tax credit for home purchase could rise
Is $8,000 not enough to get you to buy a home? Lawmakers and businesses are calling for expansion of a tax credit for first-time homebuyers, according to a story posted June 22 on usatoday.com.
"With the tax credit scheduled to expire in fall, some business groups say the amount of the credit, now capped at $8,000, should be raised to $15,000 and applied to anyone who buys a home. First-time buyers make up a hefty 40 percent of home purchases, according to the National Association of Realtors (NAR), which is about 5 percentage points higher than the historical average."
Current proposals:
•A Senate bill to expand the tax credit to $15,000 for any homebuyer regardless of income was introduced this month by Sen. Johnny Isakson, R-Ga. It is co-sponsored by Senate Banking Committee Chairman Chris Dodd, D-Conn.
•A House bill to keep the $8,000 credit in place until June 2010 and expand it to all homebuyers was introduced last month by Rep. Kenny Marchant, R-Texas. It also would provide a $3,000 credit to homeowners who refinance.
•Another bill in the House, introduced by Rep. Eddie Bernice Johnson, D-Texas, would extend the credit to all homebuyers through 2010.
7 things to know about the First-Time Home Buyer Tax Credit
1. The tax credit is for first-time homebuyers only. For the tax credit program, the IRS defines a first-time homebuyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
2. The tax credit does not have to be repaid.
3. The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.
4. The credit is available for homes purchased on or after Jan. 1 and before Dec. 1.
5. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
6. Taxpayers buying a home who wish to claim it on their 2008 tax return, but have already submitted their 2008 return, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
7. Prospective homebuyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take-home pay. This money can then be applied to the down payment.
More info: www.federalhousingtaxcredit.com/2009
