Hip, Hip, Hooray! Buy a Home for Tax Breaks Today!

The potential for a revitalization of the residential real estate market has been given a tremendous boost with the passage of the American Recovery and Reinvestment Act, to be signed into law on February 17 by President Obama. Here are the criteria for earning a tax CREDIT, courtesy of Uncle Sam, meaning you actually will experience your federal income tax being reduced by the appropriate dollar amounts detailed below. Consider it a "discount."

Who? First-time purchasers only. You are a first time buyer if you have not owned a principal residence in the 3 years prior to the purchase. There is an income cap of $75,000 for individuals, or $150,000 for couples to receive the maximum tax credit. There is a phase-out above those caps up to $95,000 and $170,000 respectively. Caution - you must continue to own the home for three years, or else be required to return the entire amount of the credit when you sell the home. Ouch.

What? Any single family residence (including condos, co-ops, townhomes) that will be used as a principal residence.

When? Any principal residence home purchased between January 1, 2009 and December 1, 2009.

How? Just do it! The credit will be a maximum of $8,000 (or 10% of the cost of the home, whichever is lesser). So if you purchase a $300,000 home, and otherwise qualify for the tax credit, Uncle Sam could credit you the $8,000 (because 10% of $300,000 would be $30,000, and obviously the $8,000 is the less than $30,000).

If you have been undecided about making that home purchase until now, waiting to see what Congress would do, wait no more. Contact a local Realtor and start your search right away. Realistically, you have 9 1/2 months to find, negotiate, and close on a home.

I will be watching industry news reports on the trend of homes going under contract over the coming weeks and months, looking for a positive turn in home sales. Stay tuned.