Homebuyer Tax Credit Makes Homeownership Possible
“Should I rent or should I own? Whats more beneficial, having my own place or the peace of mind that if anything breaks, the landlord will take care of it?”
I started asking myself this question two years ago, when my one bedroom apartment in a northwest suburb of Chicago declined significantly within the 3 years I lived there. I knew it was time to move when I started receiving letters from the Rental Office cautioning residents about theft and assault. After comparing how much I spent on rent and what a mortgage payment would cost me a month, I realized that by just adding a little bit more, I would be able to fulfill the American dream of homeownership.
Homeownership is great, but tough on a single income. Although I was financially prepared, I quickly realized that with a new home comes new responsibilities. I learned this lesson well during one chilly November night when I went downstairs to fire up the furnace… and it didn’t. After a week of wearing my Chicago winter gear indoors, I broke down and purchased a new furnace. Nothing says, ‘Welcome to Homeownership!’ better than a bill to remind you of it for years to come.
Fortunately, I was able to take advantage of the Homebuyer Tax Credit that was initially offered in 2008. At the time, eligible first-time homebuyers can claim a maximum of $7,500 credit on their tax return for 2008 and repay it in 15 years. It was pretty much an interest-free loan from the government that I will have to pay back through my 2009 tax return and every year thereafter until 2024. However, it helped me ease into the joys of homeownership; like replacing a furnace that was supposed to last another five years, pulling up carpets that can be deemed an allergy-sufferers worst nightmare, repairing malfunctioning electrical outlets, fixing leaky kitchen faucets and the like.
If you’re a first time homebuyer who purchased your home before December 1st, 2009, the credit has been increased to $8,000 and the credit doesn’t have to be paid back. Initially, the credit was only available to taxpayers who have a contract to buy before April 30th, 2010 and closing by June 30th, 2010. However, new legislation has extended that closing window by a day. So taxpayers who are in a contract to buy before May 1st, 2010 can close on that home before July 1st, 2010 and still receive the credit. The credit can be claimed on your 2008 or 2009 tax return. If you already filed your taxes for 2009 (the deadline was April 15th), there may be other options for you. Check out the IRS website to see if there is still a way for you to claim the credit. And always, when in doubt, speak with a professional like your tax advisor or your accountant.
Despite declining home values, threats of foreclosure and all of the other dilemmas homeowners all across the country are experiencing right now, I am still glad I made the leap from renter to owner. I’ve lived in my parents house when I was growing up and in apartments when I ventured out on my own. But it wasn’t until I purchased my own townhouse that I realized there was a difference. I agree with Dorothy. There’s no place like home (especially one that you own).
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