Minneapolis Minnesota Real Estate Blog

A tax credit is applied directly to taxes owed. If you owe $8,500 in taxes and apply the $8,000 tax credit, your tax bill is reduced to $500. If you have already paid $9,000 through payroll deductions or estimated tax payments, you will get a refund of $8,500.  This is a great opportunity to invest in the Minneapolis Minnesota real estate market.

A tax deduction is a reduction against earned income. If you made $100,000, an 8,000 tax deduction would simply reduce that income for tax purposes to $92,000, and you would pay taxes on that lower income.

For example, if a Minneapolis MN first-time home buyer purchases a $100,000.00 home, that person will receive a credit of up to 10% with a maximum cap of $8,000.00.  So, this home buyer can deduct the full $8,000 tax credit from the amount of taxes owed. If you usually get a refund on your taxes -- and you qualify for the maximum tax credit -- you can add another $8,000 to that refund for 2009.

Only first-time home buyers are eligible. This is defined as not owning a home over the past 3 years. The other qualifications are:

1. The home must be your principal residence, the home where you live.
 
2. Only homes purchased on or after January 1, 2009 and before December 1, 2009 qualify for the tax credit.

3. Limited to individuals with adjusted gross incomes of $75,000 as a single person or $150,000 filing jointly. There is a phase-out for single incomes between $75,000 and $95,000, and for couples filing jointly with incomes between $150,000 and $170,000.

Additional information to know:

1. The 2009 $8,000 tax credit is not a loan and does not need to be repaid. It's like free money for buying a house during the specified time period and meeting certain requirements.

2. You can use the credit if you financed your home purchase with state or local bond funding.

3. If you sell that home within the first 3 years of ownership, you will be required to give that money back to the I.R.S. So, if you take advantage of the tax credit, plan to stay put for 3 years.

For answers to your First-Time Home Buyer Tax Credit questions give Mike Weiland of The Weiland Group a call at 612-735-6834 or send an email to mike@mikeweiland.com.