Since the passing of the American Recovery and Reinvestment Act of 2009, first time home buyers can now qualify for a $8000 home buying tax credit from the IRS. Unfortunately, the way this first time buying housing tax credit was designed is that you get the tax credit when you get your tax return in 2010 not at the time when you need it most; the time when you are buying your first home. The time frame for purchasing a home and getting the tax credit is January 1, 2009 through December 1, 2009.
Short Term Tax Credit Loan Programs In Some States
Fortunately, some states have initiated programs that provide short term loans for first time home buyers who need help coming up with enough cash for their down payment and closing costs. Most of these loans come with no or very low interst rates and are intended to be paid back when the first time buyer gets their tax refund following their home purchase.
No State Tax Credit Loan Program? Get A Gift or Loan From A Family Member
Another way to get the money you need for a down payment and still take advantage of the $8000 tax credit is to get a gift from a relative or family member. You can also borrow the money from someone and pay them back with your tax credit refund when you get it later on. One thing that you need to consider is that if you do get a loan that requires payments then you will have to count that payment amount in your debt to income ratio. So be careful what kind of loan you set up.
Reduce Your Tax Withholding On Your Pay Check
Another way to get access to your tax credit indirectly is to reduce your tax withholding on your paycheck by increasing the number of deductions claimed on your W-4. If you recall, when you started working, your employer had you file out and sign a W-4. This form tells your employer how taxes to take out of your paycheck.
If you increase your deductions you will essentially get more in your paycheck. The extra money you can set aside for your down payment and closing costs. The less you pay in taxes now will reduce dollar for dollar the housing tax credit that you can get later. If you plan it right, you can get paid an extra $8000 in your paycheck now and get no housing tax credit later.
Summary of State Housing Finance Authority Short Term Tax Credit Loan Programs
A great loan program to use your home purchase tax credit is a HomePath Mortgage. Learn more about purchasing a home with a HomePath Mortgage.
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