Home Buyer Tax Credits Are Working??!!

November 12, 2009

The first time home buyer tax credits in 2009 didn’t really interest us that much since we’ve owned our home for just under ten years now.  However, the latest version of the bill now includes a tax credit through 2010 for homeowners who have lived in the same place for five of the last eight years consecutively.

This new home buyer tax credit will give you a credit up to 10% of the cost of your new home, with a cap of $6500.  I’ve had a busy week and hadn’t given much thought to new bill yet until my wife called me up at work yesterday.

New House Fever

My wife’s been wanting to move into a new house for a few years now and has been contributing to a “moving fund”.  The issue is that she has her eye on a bigger house but I don’t want our house payments to increase any. The planner that she is, my wife opened a separate account and has been putting away money to fund an eventual purchase of a house upsizing.  Our family has grown since we bought our house and future plans project additional growth so we may need the space someday.

Based on home sales in our area and the estimated cost of a new home, she had in mind about how much she needed to put away before we could start looking at houses.  A tax credit of $6,500 would accelerate her schedule by almost a year so she was pretty excited when she heard about the new law.

Since the home buyer tax credit is a dollar for dollar reduction of taxes and is refundable, you could look at it as knocking $6,500 off the purchase price of a home we would buy.  We would still be short of the total figure she was trying to save up but the “free” $6,500 is rather enticing.

Home Purchase Timing

The latest version of the law says that we would need a contract on a house before May 1st of next year and that the sale would have to close before July 1st.  While Obama did extend the first time home buyers tax credit with this bill, the general consensus is that there won’t likely be another extension.

That means we’d have to find a house by May of 2010, which gives us about 6 months of searching, planning, and maneuvering our finances before we’d have to pull the trigger. According to the bill we could file an amended tax return for 2009, claiming the tax return for 2009 so we would potentially “see the money” sometime in 2010.

Are the Home Buyer Tax Credits Working?

In one night, our family went from talking about buying a house two years down the road to suddenly considering purchasing a home by next May so I’d say that the home buyer tax credits are having an impact.

Of course at this point it’s just talk so we don’t know if we’ll actually go through with it but my wife signed up for new home alerts from several real estate websites last night and we we spent about an hour talking through some of the details so momentum is building.

I’m not a big fan of moving, it takes time and money and the whole process of home searching and buying can be quite stressful.  Plus I really like where we live now so I’m not really jumping up and down about buying a new house.  But life has a way of shifting when you least expect it to.  Thanks a lot Obama for signing the bill and pulling the rug out from under me, you’re going to give me a ulcer : )

Ben

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Ben

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn’t like the other kids… His addiction to personal finance has paid off for his family and now he’s helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.


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Comments

7 Responses to Home Buyer Tax Credits Are Working??!!

  • Ben

    Erica, those are good tips! Perhaps you could convince my wife of their wisdom : )

  • Erica Douglass

    I think you’d be smarter to wait it out for a few reasons. One, housing prices are still dropping, so if you wait another year or two, you’d probably save more than $6500 anyway. Two, the longer you wait, the more you have your money working in your favor (gaining you interest) vs. working against you (paying a larger mortgage.) Don’t underestimate the value of having a lot of cash in the bank and little or no mortgage!

    -Erica

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