How the $8,000 Real Estate Stimulus Plan Really Works

How the $8,000 Real Estate Stimulus Plan Really Works

As if buying a home during a down market while real estate offerings are plenty and prices are low wasn't enticing enough first time home buyers can also qualify for an $8000 tax credit thanks to the $787 billion stimulus plan that Obama signed in February. This is a credit and not a loan so it doesn't have to be repaid like earlier tax credits of $7500.00 that were available. This stimulus plan can provide a real incentive for people who really want to purchase a home, but are hesitant due to the recent strains on the real estate market.
There are some rules and exceptions to this real estate stimulus plan, which are to be expected from anything planned and executed by the government. The amount of the tax credit a new homebuyer receives is based on 10% of the purchase price of the home, but capped off at $8000.00. This means that a new homebuyer must be purchasing a home for $80,000.00 or more in order to qualify for the full amount of the stimulus. The new homebuyer also needs to make $75,000.00 or less per year if they are single or $150,000.00 or less combined for married couples.

Another caveat is that the stimulus is meant to help people find a home to live in and not for those wishing to invest in real estate. If you live in the home less than 3 years after receiving the stimulus you may have to pay the government back. The good news, however, is that this tax credit is refundable which means a new home buyer could get a refund up to the full $8000.00 if they do not owe any taxes.

Also, the term "new home buyer" needs to be clarified. For the purposes of this real estate stimulus tax credit a new homebuyer is a person who hasn't owned a home for at least the past 3 years and is purchasing a home during 2009 for their primary residence.

Rules and exceptions aside, this real estate stimulus plan tax credit provides a real opportunity for a lot of people to be able to afford a new home. And with all the money they get back on their taxes they will be able to afford to do any necessary repairs and maybe even buy some new furniture to make their house into a home. The government may get a lot of things wrong, but the new stimulus plan definitely has the potential to help a lot of people become homeowners while helping the mortgage industry attract new customers and begin to recover.