Make Money and Save Money

Have you purchased a home for the first time in the past year? Do you plan on purchasing your first home before December 1st of this year?

The American Recovery and Reinvestment Act of 2009 includes a refundable credit you can claim on your 2008 or 2009 tax returns.

The 2008 credit is 10% of your purchase price up to $7500. This credit is more like an interest free loan because you must pay it back over a 15 year time frame starting in 2010. This is available to anyone who purchased their first home between April 1, 2008 and December 31 2008. 

The 2009 credit is 10% of your purchase price up to $8000. Unlike the 2008 credit you do not pay this money back unless you sell your home within the first 3 years. The IRS have added a provision that allows those who have purchased their home already this year to claim the $8000 on their 2008 return. If you have already your return for this year you may choose to Amend it and claim the credit or you can wait and claim it on your 2009 return.

An interesting fact is legal land contracts are eligible for this credit as well, it does not extend to the rent to own/lease to own contracts. This opens the door to many purchasers who have had to go the land contract route because of their credit scores or other situations.

Hopefully this will help many taxpayers in this unstable economy. Now if I were to claim this credit I have laid out a plan to pay my mortgage off early. I would put $4000 into a 32 day CD and keep rolling it over for 18 months. $2000 would go directly towards the principle. The remaining $2000 would go towards improvements of the home. After the 18 months are over I would split the money in the same manner paying off my mortgage as quickly as possible while building equity.