Exploring the First-Time Homebuyer Tax

There is a great post on the Red, White and Blue Press today authored by Isaac Lewis. This blog is a nice morning pit stop and their examination of how the First-Time Homebuyer Tax Credit is helping the housing market is worth glance.

http://www.rwbpress.com/2010/03/04/is-the-first-time-homebuyer-tax-credit-helping-the-housing-market/

As you may not know, qualified first-time homebuyers are able to apply up to an $8,000 credit on their 2009 tax return. Credits are different than deductions -- they are applied after the individual tax is calculated and drive down the total tax bill that you owe. This generally results in a comparatively less tax owed and thus higher refund of withheld payments, although the credits are only limited to bring you down to zero tax and not past it (you cannot "cash in" the credit). Leftover credits are generally carried forward onto future returns.

Think of taxable credits like free points on an exam from the professor after a grade has been set. Let's say the class gets 10 free points on the exam. If you originally earned an 82/100, your new grade will be 92/100. However, if you originally earned a 92/100, your new grade would be 100/100 and the leftover 2 points would be applied to the next exam.

But back to the First-Time Homebuyer Tax Credit. This credit is a byproduct of President Obama's Stimulus plan and beneficially provides enticement for folks of our generation to make their first home purchase (as long, of course, if you can secure the loan). Be smart, but this is a credit of which to certainly take advantage. Purchase a house with a mortgage that you can afford, build some equity in it, and watch your investment grow.

Our generation should be aware of opportunities such as the First-Time Homebuyer Tax Credit. And that is why Mass Tax-ed is here. We sort through the babble and provide a clear explanation for important tax-related policies to our younger generation. Do you like what you see? Stay tuned for more.