Would you take advantage of $3750 tax credit for house?

[jeebuss31]

Hi everyone,

Has anyone here taken the advantage of the tax credit for purchasing a new home? From reading this article:Housing Help--For Accountants - Forbes.com I figured it would help us since our wedding is coming up and it'll help our EF untouched.

Since my fiancee and I are single until May09 and our closing date will be before that, I won't qualified for the credit(singles that makes over $95k) but my wife does and it's $3750.

I'm planning to put almost 25% down payment, this would take my EF to 2 months of saving. I was thinking, since this is a interest free loan, maybe I can recoup some of the money back from tax return and bump up my EF. What does everyone think about the credit? Am I overlooking this situation?

Again, thanks for all your help!

[maat55]

I personally would not take it, although if you were to take it and put it into a high yeild savings account or other investment, it would be a way to make a few bucks on the tax payers dime.

[jeebuss31]

Hi Maat55,
Thanks for the quick response! In our situation, after down payment, we don't have the 3-6 mos of EF. Since this is a risk, I was thinking the credit would be nice to put away in savings. While it's making a little money, it'll also be access to use it if there's a emergency. Or I could just put the 20% and keep the 5% as EF, but our monthly payment would go up. And our goal is to lower the payments as much as we can.

[tripods68]

If you read that article it goes by saying:

But the way the credit works, it’s actually more like an interest-free loan. Two years after you claim this credit, you have to start paying it back. The payback comes over 15 years in 15 equal installments--meaning you owe an extra $500 on your tax return each year. Sell your house, and you have to pay the rest back that year from your profits. (No profits, no pay back. Also, if you die, your heirs are off the hook.)

As it turned out you have to pay that back. Not a good deal. Even if park on CD or MMA, interests alone (after 2 years) would TRUMP paying back that in taxes alone unless it is deployed to take on high risk/leverage investment.

[project15]

We just bought this past summer and qualify for the $7500. I'm definitely going to take advantage of it and apply to it the mortgage to save on interest.

[jeebuss31]

Project15, congrats on the new purchase! Since you bought yours in 08, you should get the check this tax return...So if I bought my house in Jan 09, will I get it in 09 or 2010 tax returns?

tripods68-
I know I have to pay that amount back, but if I store it as a EF (since I'll have low EF after down payment) and not use it, wouldn't it actually pay itself back if I never use it?

[momof1in150]

Project15, congrats on the new purchase! Since you bought yours in 08, you should get the check this tax return...So if I bought my house in Jan 09, will I get it in 09 or 2010 tax returns?

tripods68-
I know I have to pay that amount back, but if I store it as a EF (since I'll have low EF after down payment) and not use it, wouldn't it actually pay itself back if I never use it?

If you buy your house in 09 you can take the credit (loan) with you 08 taxes. I have a .pdf document that I can e-mail you if you want. You start paying it back with you 09 tax return. You have to buy before June 30, 2009 and if you buy after you file you can file an amendment.

[tripods68]

tripods68-
I know I have to pay that amount back, but if I store it as a EF (since I'll have low EF after down payment) and not use it, wouldn't it actually pay itself back if I never use it?

NO! Your tax at your "earned income" based on AGI (marginal tax rate 15% or 25% +). Unless you can earned that much in return, the tax credit isn't worth it IMO.

The first two years are the only time you benefit.