When buying a home in Washington, D.C. you should work with a lender familiar with Mortgage Credit Certificates (MCC’s) and who is participating in the MCC Program. A Mortgage Credit Certificate allows eligible borrowers to claim a Federal Tax Credit of 20% of the mortgage interest paid on the mortgage during each calendar year. The remaining 80 percent of the mortgage interest paid for that year may still be claimed as a tax deduction.
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The Homebuyer Tax Credit was passed earlier this year as part of the government stimulus package. Credit for those purchasing a home as their primary residence is worth 10% of the purchase price, up to $8,000. This credit is only available to those who have not owned a home for the previous three years. It can be claimed on your 2009 tax return. If the credit exceeds your tax liability, you will be refunded the difference.
If you move out of the residence within 36 months or cease using it as your primary residence, you have to repay the credit in full on your tax return for the year you move out.
The purchase of your home must be completed by November 30, 2009 when the Homebuyer Tax Credit will expire.
Many analysts fear that with the end of the tax credit, any resurgence in the housing market will slow down significantly or come to an end. So, it is worth noting that there is support in Congress and in the industry for an extension of the tax credit through next year. Rep. Johnny Isakson, R-GA, is leading the push in Congress for legislation which would include not only an extension, but also would raise the credit to $15,000, remove income restrictions and include non first time home buyers. Stay tuned to this blog for more.