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The Government’s Home Buying Tax Credit Initiative

by

Jeremy C. Winters

The home buying tax credit is a government initiative to stimulate housing sales by providing a subsidy to home buyers, especially those who are buying homes for the first time. The subsidy allocated by the government encourages buyers to legally acquire houses for the benefit of enjoying tax credits. The real estate industry consequently rushes to assist buyers in getting the tax credit. This results in an active real estate industry, which is a critical aspect of stimulating the economy.

In prioritizing the beneficiaries of the home buying tax credit, first time home buyers are preferred for the subsidy. Credits not to exceed $8,000 are doled out by the government depending upon the price of the real estate, which is usually 10% of the selling price. The credited amount is also refundable. If a taxpayer who bought the house qualifies for a tax credit worth $8,000 but only needs to offset taxes worth $6,000, then a check worth $2000 is returned to the taxpayer through the Internal Revenue Service.Taxpayers who want to make a claim must also make sure that the purchased home will be their principal residence for the first three years. This policy is enacted to ensure that home buyers are really in need of the tax credit and are not just exploiting the benefit for investment gains. They also have to show proof that they have not owned a principal residence for three years before acquiring the property.Recent changes in the policies restrict the home buyer from getting a house that costs more than $800,000. The capping on the price of the house avoids possible lavish expenditures, and instead promotes the primary goal of benefiting those who are in need the most. Home buyers planning to buy the house from a lineal relative or his or her spouse’s lineal relative are also not qualified for the tax credit.The economic downturn, on the other hand, influenced annual income restrictions positively by increasing the upper limit to $145,000 for single filers. For married filers, the credit phases out between $225,000 and $245,000. These changes are seen to be more generous compared to the similar policy stipulated under the former law.The home buying tax credit initiative was an effective strategy undertaken by the government to stimulate the economy. This law was extended to benefit more home buyers and to keep the real estate industry active thereby contributing to economic growth. The extended law even expanded in coverage by stating a separate priority for qualified repeat home buyers allowing them to enjoy tax credits not to exceed $6,500. The whole package is estimated to cost $11 billion.

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The Government’s Home Buying Tax Credit Initiative}