Some new homebuyers can get a little help from the Internal Revenue Service this year, thanks to Congress, which passed the Housing and Economic Recovery Act of 2008. The legislation includes a maximum $7,500 tax credit for first-time homebuyers who purchase a main home between April 9, 2008 and June 30, 2009. For main homes costing less than $75,000, the credit is 10 percent of the purchase price.According to www.irs.gov, a main home can be a “house, houseboat, house trailer, cooperative apartment, condominium or other type of residence” in which the buyer lives most of the time.To qualify as a first-time homebuyer, a buyer or a buyer’s spouse must not have owned any other main home for the three-year period ending on the closing date of the home purchase.Single people whose modified adjusted gross income is less than $75,000 or married couples having an MAGI less than $150,000 qualify for the full tax credit. Singles and married couples whose MAGI is $75,000 to $95,000 and $150,000 to $170,000, respectively, qualify for part of the credit.The legislation attaches a few other conditions: The house must be located in the United States, cannot have been purchased or inherited from a relative, cannot be financed by tax-exempt mortgage revenue bonds and cannot have been resold in 2008.Unlike many tax credits, this tax credit must be repaid. Anyone taking the full $7,500 tax credit must add $500 to their tax bill in 2010 and each year thereafter for a total of 15 years. If the house is sold before the credit is repaid, the full balance of the tax credit is due on the tax return for the year of the sale.”It’s like a zero-interest loan,” said Jim Matthews, a local builder.Matthews said he thinks the tax credit will help the local economy by spurring housing improvements. Someone who buys a house and qualifies for the tax credit could use the $7,500 to fix up the new house and hire painters, carpet installers, plumbers and electricians; instead of giving the money to Uncle Sam.”It’s a great program,” said Colorado Springs Realtor Mike Smith. “The trouble is, not too many people know about it.”Smith said he has talked with a lot of people who prefer to rent because they don’t know what will happen with the housing market.”Right now, interest rates are at 4.5 to 5 percent. There’s money available,” Smith said. “There are a lot of houses out there that are great buys, and yet people are being so cautious. I can’t blame them for that.”Data that Smith has reviewed indicates Colorado Springs is among the top seven cities in the country for recovering the quickest from the housing downturn.For most, it can’t happen soon enough.”I’m 55 years old, and I’ve never seen anything like this,” Smith said.”The idea is to get people off the fence and move forward,” Matthews said. “Interest rates have come down in the last 30 days, from 6 percent to 5 percent.”The average home price in El Paso County a year ago was $200,000. A drop of a full point on a $200,000 mortgage is a savings of $150 a month. So, for people who say, ‘I’m waiting for things to get better,’ well, that time is now. It’s a great time to refinance, too,” he said.For more information on the tax credit, go to www.irs.gov and search for Form 5405, the First-Time Homebuyer Credit.
