Popular Alternatives to First Time Home Buyer Credit
Planning to buy your first home and wondering if there are any tax breaks available to help? Perhaps you have heard about first time home buyer credit. It was created by Congress as part of the Housing and Economic Recovery Act of 2008. However, for most buyers, the first time home buyer tax credit was only available for a limited time: 2008 to 2010.
Although the new homeowner tax credit is no longer available, there are plenty of other programs that can help you buy your first home. And once you become a homeowner, you may be able to leverage tax breaks for new home buyers intended to help ease the cost of owning a home.
What is a Tax Credit?
A tax credit is the amount of money that taxpayers can deduct from taxes payable to the government. Unlike tax deductions and exemptions that decrease the amount of taxable income, a tax credit decreases the actual amount of tax payable.
Governments may provide a tax credit to encourage a particular behavior, such as swapping older appliances with more energy-efficient ones, or to help underprivileged taxpayers by decreasing the total cost of accommodation.
What was the First time Home Buyer Credit?
The first time home buyer tax credit was part of the legislation passed by the federal government during the period of Great Recession. This legation was intended to help recover the economy. The 1st time home buyer tax credit was for individuals and couples who bought a new house between April 8, 2008, and Sept. 30, 2010.
In July 2010, Congress extended the closing deadline for the credit until Sept. 30, 2010. However, houses purchased after this deadline could not qualify for the credit. And home buyers and proprietors had to satisfy other specific eligibility criteria to claim the new home buyer tax credit, including meeting income limits.
Can I Claim the First time Home Buyer Credit?
At present, there’s no federal 1st time buyer credit. In 2018, legislation was presented in the Senate to reintroduce the credit, but it wasn’t accepted. So, if you bought your house between April 8, 2008, and Sept. 30, 2010, and fulfilled the eligibility criteria, you may have claimed the first time home buyer tax return when filing your income tax return in 2008, 2009 or 2010.
If you didn’t claim a credit or deduction in the tax year you were eligible for, you can claim it by filing an amended return. However, you have to file within 36 months of the date of the original return, or 24 months from the date you paid the tax, whichever is later. As the first home buyer tax credit ended in 2010, it’s now very late to claim through an amended tax return in 2020.
First Time Home Buyer Credit Alternatives
The following are some popular first time homebuyer tax credit alternatives to provide you with closing cost and down payment assistance.
The federal government provides different types of loans to help people buy their first house. These loans may have less strict eligibility criteria and be more reasonable compared to other kinds of loans.
- FHA loans: These are loans from private creditors that are supported by the Federal Housing Administration.
- USDA loans: These loans are sponsored by the U.S. Department of Agriculture for low and moderate income mortgagors in rural areas. They often come with no down payment and are usually cheaper than FHA loans.
- VA loans: These are loans from private lenders that are backed by the U.S. Department of Veterans Affairs for eligible veterans, service members and their spouses.
Fannie Mae and Freddie Mac Programs
These are government-sponsored mortgages that are intended for low income homebuyers. Both programs require a 3% down payment.
The Department of Housing and Urban Development (HUD) offers a Homeownership Voucher Program that can help low-income families make their monthly mortgage payments, as well as meet other home expenditures.
Tax Breaks for New Homebuyers
The federal government offers the following tax breaks for new homebuyers:
- Mortgage interest deduction: It allows you to deduct mortgage interest you paid during the year on your federal income tax return.
- SALT deduction: If you’re paying certain state and local taxes, including property taxes, this tax break allows you to subtract up to $10,000 of these costs on your federal taxable income.
- Residential energy credits: They are available to eligible homeowners who make energy-efficient improvements, such as installing solar panels or efficient heating and air-conditioning systems.
Main Line Homes is Your Resource
The costs of buying and owning a home are substantial. But by taking advantage of the first time homebuyer credit alternatives and tax breaks available, you can cover the cost of home buying and homeownership.
Before you make a move toward buying your first home, make sure you understand where your credit stands and how it might impact your eligibility for home loans.
With Main Line Homes by your side, you don’t have to worry. Whether a Bryn Mawr colonial or ranch style haven in Radnor, we can provide great knowledge and resources to help you finance your first home. Call (610) 642-3744 today to get started!