$15,000 Tax Credit?

Last night the Senate passed a $15,000 Tax Credit for ANYONE who buys a home. This applies for new or existing homes as long as they are your primary residence. Currently the tax credit is $7,500 and is for First Time Home buyers only. It also must be paid back over 15 yrs (interest free), however legislation is already in the works to remove the payback feature. If this $15,000 version fully passes (part of current stimulus package being voted on), it will be a great boost! It will not be an end all be all or a quick fix, but it will help spark some interest. This is expected to cost $19 Billion. While the cost is steep, it is well worth it. Especially with all the money being thrown at our economies problems that has not worked. Most first time home buyers are not necessarily sitting on the sidelines anyway. They have no ties and if they want a home, they can buy one. Prices are low, rates are low, and tax credits are already available. Now everyone can have a crack at the tax credit! Many still can't take advantage or won't because they have a home to sell or they are locked into a particular situation that keeps them from buying. So the idea that everyone will be out and about buying homes is false. However, if passed this will surely generate some buzz and excitement that was missing from the marketplace. I have had several conversations with Realtors and others about this very subject. Most were wanting this and now it is a possibility. The other major question about this tax credit is how it effects the closing. This is something that will not effect your closing by providing additional funds to put down or help with closing costs. This is a TAX credit that will be factored in when you do your taxes for the year you purchased the home. I spoke with an accountant about this briefly last night and he did bring up one good point. With such a large credit on the table to add to the refund you probably already receive, he offered an idea. Since you know this is on its way you can get with your payroll department and adjust your withholdings. This will allow you to withhold less from your paycheck so you can have more money in your pocket NOW. The whole idea behind withholding is so you don't owe a huge chunk at tax time. The downside is you can't take advantage of your full pay in the meantime. It comes back to you in the form of a tax refund. So by adjusting your withholdings you can access some of your future credit each month by utilizing more of your monthly pay that normally would be taken out. Make sense? I know it isn't as exciting as getting a big fat check, but it is better than nothing and you will still get a hefty tax credit and in turn tax refund come tax time!

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Posted by: Eric Hemmer