The Housing and Economic Recovery Act of 2008 was signed by President Bush on July 30, 2008. While the primary intent of the Act was to improve confidence and stability in the housing market by providing mortgage relief by keeping American families in their homes, another area of the Act provides a huge tax break for first-time Pasadena home buyers.

First time home buyers (means any individual who had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence) may receive a tax credit up to $7,500, and for couples using the standard deduction to receive an additional $1,000 deduction for property taxes ($500 for individuals).

READ MORE: How are property taxes calculated on your Pasadena home?

In order to receive this tax credit, the home purchase must take place between April 9, 2008 and July 1, 2009.

This temporary Act was designed to get home buyers who were thinking of purchasing a home to act now to stimulate home purchases, and help home builders and real estate agents sell more homes.

Here are some key provisions of The Housing and Economic Recovery Act of 2008:

Who is Eligible?

  • The $7,500 tax credit is available for first time home buyers only.
  • The law defines first time home buyers as a buyer who has not owned a home during the past three years.
  • All U.S. citizens who file taxes are eligible to participate in the program.
  • All homes, whether single family, townhomes or condominiums apartments will qualify, as long as the home will be used as a principal residence.

Income Limits:

  • Home buyers who file as single or head-of-household taxpayers can claim the full $7,500 credit if their adjusted gross income (AGI) is less than $75,000.
  • For married couples filing a joint return, the income limit can not exceed $150,000 AGI
  • Single or head-of-household taxpayers who earn between $75,000 and $95,000 AGI, are eligible to receive partial first time home buyer credit.
  • Married couples who earn between $150,000 and $170,000 AGI are eligible to receive a partial first time home buyer tax credit.
  • The tax credit is not available for single taxpayers whose AGI is greater than $95,000 and married couples with an AGI greater than $170,000

Tax Credit Refundable:

  • A refundable credit means that if the taxpayer pays less than $7,500 in Federal income taxes, the government would write the taxpayer a check for the difference. (If the taxpayer owed $3,500 in taxes, he would pay nothing and receive a check for $4,000 from IRS.)
  • If the taxpayer were to receive a $1,000 tax refund from the IRS, the refund would grow to $8,500 ($1,000 refund due, plus $7,500 from the home buyer tax credit).
  • Home buyers may take the tax credit in their 2008 or 2009 tax return.
  • If the purchase took lace in 2008, the tax credit would be taken in the 2008 tax return. If the purchase takes place in 2009, the tax credit can be taken in 2008 or 2009, at the home buyers' option.

Payback Provisions:

  • The tax credit is essentially an interest-free loan to be repaid over 15 years.
  • For example, a home buyer claiming $7,500 credit would repay the credit at $500 per year over 15 years. if the home owner sold the home then the remaining credit would come from the profit of the home sale. if there was insufficient profit from the sale of the home, the remaining credit payback would be forgiven.

Are you ready to take advantage of this Tax Break and buy your new Pasadena home or Pasadena condo? If so, here's how you can get a list of homes for sale in Pasadena for your review:

READ MORE:  Pasadena real estate update 2012 – see luxury home sales.

Irina is a Top Realtor and the founder and President of Pasadena Views Real Estate Team™. She is available to assist you in all of your Real Estate transactions. Email or call her today at (626)629-8439.

Are you relocating to Pasadena?  If so, take a look at our 365 Things To Do In Pasadena® .  Call us at 626-629-8439 to schedule a time for your free home buyer or home seller consultation!

Posted by Irina Netchaev, your Pasadena Real Estate Agent.

Information provided by Jeff Elias