Eight thousand reasons to buy your first home

If you've been paying attention to the recent "stimulus" activities in Washington, you already get the reference to 8,000 reasons in the headline above. It's really only one reason, but it could be worth $8,000 to you. The legislation signed this week by President Obama contains a measure for first-time homebuyers to receive a tax credit up to that amount if they purchase a home.

But wait ... there was already a $7,500 tax credit in place, so is another $500 really such a big deal? Yes, but not because of the higher dollar amount. Hey, I'm not one to look askance at 500 bucks, but the real exciting news is that the repayment feature of the tax credit has been removed.

With the previous version of the tax credit, you were obligated to pay it back in equal installments over 15 years. Now you don't have to repay it at all (unless you sell your house within three years). As before, a first-time homebuyer is defined as someone who hasn't had an ownership interest in a primary residence in the last three years. Also unchanged is the fact that the credit starts to phase out at an adjusted gross income of $75,000 for individuals and $150,000 for joint filers.

This credit, which totals 10% of the purchase price of the home up to a maximum of $8,000, is available for first-time buyers who purchase a principal residence between Jan. 1, 2009 and Dec. 1, 2009. That principal residence need not be a detached home, as the credit also applies to condos and townhomes.

When does Uncle Sam "show you the money"? The credit will be applied to your federal income tax bill. If you qualify for more tax credit than you owe in taxes, you'll receive a check for the difference. So, for example, if you meet the criteria for the full $8,000 credit and owe $3,000 in federal taxes, you will pay no taxes and get a $5,000 "refund."

If you've been thinking of buying your first home, this year is a great time to talk with a Texas REALTOR®. Whether you think of this new credit as 8,000 reasons or one really big one, it's a new, strong incentive to make a move.