Tax Credits to Reduce Tax Foreclosure Property Listings

by Donald Hanz on Finance Foreclosures

As tax foreclosure property listings continue to grow longer because of unabated foreclosures, the government has found ways to reduce the number of foreclosed homes. This time with the help of first-time home buyers.

A tax credit of $7,500 was granted by the government to entice first-time buyers to purchase homes from tax foreclosure property listings. The tax credit is a component of the law, Housing and Economic Recovery Act of 2008 which aimed to boost and strengthen the housing market.

First-time buyers who are eligible for the tax credit are those who acquired homes from tax foreclosure property listings between April 8, 2008 to January 1, 2009. Qualified first-time home buyers can apply the tax credit on their 2008 tax filing.

However, this tax credit used to entice first-time buyers to buy homes from tax foreclosure property listings is more like a government loan without interest. Eligible individuals will have to repay the $7,500 on installment basis for 15 years, starting 2010. In a nutshell, first-time home buyers who avail of this tax credit plan will have to pay $500 in additional tax for 15 years.

Furthermore, when the first-time home buyer decided to sell or stop using the house he bought from tax foreclosure property listings as his primary residence, the remaining balance of the $7,500 become due the tax year that it happens.

Meanwhile, another tax credit for first-time home buyers is contained in the American Recovery and Reinvestment Act, an economic stimulus bill which also has foreclosure prevention as one of its goals.
Unlike the tax credit mentioned above, the $8,000 is real a tax credit and not a loan in the sense that first-time home buyers need not repay it provided that they remain in the house they bought from tax foreclosure property listings for at least 3 years from the date of purchase.

The $8,000 tax credit applies to houses purchased from January 1 to November 30, 2009. However, unlike the $7,500, this tax credit can be claimed by first-time home buyers on their 2008 tax return, according to the Internal Revenue Service (IRS).

These two tax credits do not apply to single first-time home buyers who receive more than $95,000 in gross income and married couples with combined income of $170,000.

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