2009 Federal Housing Tax Credit, Now Refundable

For many people in the United States, the year 2009 is the ideal time to purchase an inexpensive home. Home prices continue to drop everyday and with the implementation of the new federal housing tax

Published on June 24, 2009 by Joel McLaughlin (OfficialWire) PHOENIX, AZ

In the recently passed American Recovery and Reinvestment Act, it is now possible for homebuyers to receive 10% of the purchase price of their home up to $8,000 in tax credits this year.

Tax credits do not work the same way as tax deductions. Tax deductions are based on percentages of income. Tax credits, on the other hand, offer dollar-to-dollar credit. This means that if you purchase a home for $80,000, you will receive 10% of the purchase price of your home (equaling $8,000) in tax credit for your 2009 taxes.

A great benefit of the 2009 federal housing tax credit is that it is “refundable.” This means that even if you don’t owe the government money in taxes, you can still take part in this incentive program. As is apparent from its name, an eligible taxpayer purchasing a home in 2009 will receive a credit toward the taxes they owe the government. This means that the taxpayer will be required to pay the government less in federal taxes—up to $8,000 dollars less, in this case. But many taxpayers do not owe the government more than a few hundred dollars at the end of the year. Because they do not owe money, they cannot technically claim the credit. This is why the government has issued this particular tax credit as being refundable. This means that if you do not owe the government tax money and cannot use the credit, they will issue you a check for the appropriate amount. If you buy and $80,000 home this year, are eligible for the full 10% credit, and do not owe any outstanding taxes, you will receive an $8,000 check in the mail from the federal government for the purchase of your home.