Here's a little known add-on to the 2008 Emergency Economic and Stabilization Act - aka the $700 billion bailout bill: the $5000 credit for DC first time home buyers.
Area residents are familiar with this credit, and know that it had expired on Dec 31, 2007. Though typically every year it's passed in a last minute rush of bill approvals, there's never a guarantee and 2008 home buyers had their fingers crossed that it would once again find its way into a bill before year end. Well, DC home buyers, start celebrating: The bailout bill approved the $5000 credit retroactively for all 2008 purchases, and approved its use for all 2009 purchases as well!
To use the credit:
- You must buy a home in the District of Columbia (and not have owned a home in the previous year)
- You must occupy the home as your principal residence
- You must meet the income requirements (up to $70K AGI for single filers, phased out until no credit for AGI above $90K; up to $110K AGI for joint filers, phased out until no credit for AGI above $130K).
Note that this is an actual $5000 credit (not a deduction--an actual dollar for dollar offset on money owed!) on your Federal Taxes. That's the same as Uncle Sam giving you $5000 of your hard earned money back just as a 'thank you' for buying in the District. But you can't take advantage of both this credit and the new Federal $7500 "credit"--not really a credit at all, but rather an interest free loan. For almost all buyers, you're much better off taking the DC credit and passing on the Federal loan.
If you're interested in buying a DC property and want to learn more, contact me.
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2 comments:
I understand that the federal credit is a loan whereas the DC credit does not have to be paid back, so initially I assumed any DC buyer should go with the DC credit. But then I read that the DC credit is not "refundable," whereas the fed one is. In other words, for the DC credit, if you owe income taxes of less than $5000, it's not like you will receive a check for the difference. However, in the case of the federal credit, you would get the check in the mail: If you owed $500 taxes, under the federal credit you'd get a check for $7000. This could be a factor if what you need most is cash in hand right now, right? For some, maybe the federal credit is more desirable...
Anonymous, that's a good point. Of course you should check with a tax professional but I imagine that if someone is in fact in a position where they owe less than $5000 in federal taxes then you would have to run the numbers and decide whether, in your example, you'd rather have $500 free and clear, or $7500 that you would have to repay over time. (But as an aside, I'm not sure there are many home buyers who would only owe $500 total federal income tax.)
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