Cape Coral Florida's Real Estate Guide

The idea to give a tax credit to first time home buyers is nothing new. Back in July 2008, Congress passed a tax incentive for first time home buyers with the hopes that it would stimulate the housing market as well as the U.S. economy. A repayable tax credit of up to $7,500 was available to first time buyers in 2008. Because it had to be repaid, the previous "credit" was in actuality an interest-free loan. Great idea but it didn't work exactly as planned, did it?

Now we have a new president and a new economic stimulus plan. 2009 is truly shaping up to be the year of the first time home buyer. This year, first time buyers qualify for a tax credit of up to $8,000 that does NOT have to be repaid. This tax incentive is a true tax credit. Remember, a tax credit is not the same as a tax deduction. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS. Pair this new first time home buyer tax credit with historically low interest rates on mortgages and you have an investment made in real estate heaven!

Keep in mind that with both tax incentives you have to use the home you purchase as your principal residence for a minimum of three years. Otherwise, you will have to repay the tax credit amount unless you meet the criteria for an exception. Speak to an accountant or professional tax advisor to get further information about exceptions.

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary.

Take advantage of today's market and get a great deal on your first Cape Coral home! Contact me to learn more about what the first time home buyer tax credit can do for you.