By Kevin Chiu
Under the Obama Administration’s housing rescue plan homeowners may also get new tax credits. The administration’s proposal was approved as part of the president’s $787-billion bail out program and will save homeowners thousands of dollars.
The highly touted $8,000 first time buyer’s federal tax credit has become popularized as new home buyers take advantage of the credit, which expires December 1. To be eligible for the program a home must be purchased by that date. However, the stimulus plan also includes tax credits equal to 30 percent or a maximum of $1,500 for energy-efficient improvements.
The Residential Energy Property Credit can be claimed on 2009 and 2010 returns for improvements like installing insulation, energy-efficient windows, doors and heating and air conditioning systems. Larger improvements including alternative energy equipment such as solar hot water heaters, geothermal heat pumps and wind turbines may also be claimed as tax credits.
The move is an attempt by the White House to aid struggling home owners and ignite interest in natural Green Energy products. Proponents say Green Energy services would employ tens of thousands of contractors and other construction workers thrown out of work by the downturn in home building, and aid the nation in solving the pollution problems most of the country suffers from.
The stimulus package also includes additional tax deductions and credits for homeowners, which will be out-lined later in the year. The first time buyer’s credit expanded a tax credit made to home buyers in 2008, which worked like an interest free loan. First time home buyers are defined as those who have not owned a principal residence or who have never owned a primary residence at any time during the three years prior to the date of purchase.
For 2008 and 2009 tax returns, the first time buyer’s credit is equal to 10 percent of the home purchase price up to $8,000. It phases out when adjusted gross income tops $75,000 for an individual or $150,000 for joint filers. Married couples must qualify as first time home buyers in order to receive the credit.
The credit was originally created to be claimed after a home is purchased, but the Obama Administration is now allowing home purchasers to use it to cover certain purchasing costs. Home buyers with mortgages backed by the Federal Housing Administration may be eligible to receive cash advances on the credit to be used for closing costs, fees and additional money for a down payment beyond the FHA’s required 3.5 percent minimum.
FHA mortgages are available to all home buyers, regardless of income. However, there are limits on the size of the mortgage, which vary from region to region throughout the country. Some states, including California and Utah are also offering additional incentive home buyer programs and others are considering additional Green Energy alternatives to boost the sale of homes.