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8,000 Resaons To Buy A Home Now

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By ILYCE GLINK Tribune Media Services

The Tampa Tribune

Published: February 22, 2009

Q: I heard some information about first-time homebuyers receiving a $7,500 tax break. Can you tell me about this? I am a first-time buyer.

A. The $7,500 first-time homebuyer tax credit - 10 percent of the purchase price up to $75,000 - is for people who have never before purchased a home, or haven't owned one in three years. It applied to purchases from April 2008 through June.

But it was replaced last week with a better tax credit as part of the economic stimulus plan.

The new, $8,000 credit signed into law Tuesday is for first-time homebuyers who qualify under income guidelines. It applies to home purchases made from Jan. 1 to Nov. 30.

People who purchased homes from April through Dec. 31 may want to apply for the $7,500 credit, but it's more of a zero-interest loan. It must be repaid in $500 increments over 15 years.

The new credit does not have to be repaid as long as you live in the house at least three years. And it's more valuable than a deduction because it's a dollar-for-dollar reduction in the taxes you pay.

People who qualify for the $8,000 credit and have already purchased a home this year can take the credit on their 2008 income tax return. If you've already filed, you can amend your return to reflect the purchase.

My wife and I plan to make an offer on a single-family house. Our current town house, purchased in 1993 for $137,000, has about $62,000 remaining on the mortgage. We need to decide whether to sell our current home or rent it out. If we rent, it seems as if we would need to sell within three years to maintain the tax break. Given the current economy, is this a worthwhile endeavor?

Depending on the housing market where your home is located, you'll probably have better luck renting than selling at the moment. If you can hang on to the property for the next year or two, you'll likely have a better chance of selling at a fair price. So, I vote for renting.

Write to Ilyce Glink at Real Estate Matters Syndicate, P.O. Box 366, Glencoe IL 60022; or e-mail thinkglink@aol.com.

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