Lets start with the second half of the title. The "First Time Homebuyer Tax Credit" is basically an $8,000 gift from the government; but it's not just for those who have never owned a home before. Those who haven't owned a home for the three years prior to buying another will also qualify. So, if you last owned a home in June of 2006, you could buy one in July of this year and still get $8,000 (or 10% of the purchase price, whichever is less) back on your taxes. So, buying any real estate as your primary residence for $80,000 or above (before the plan expires on Dec. 1st) should make you eligible for the $8,000. Just be sure to check on all the details of qualification with your CPA. Here are a few scenarios to help explain the "Tax Credit":

Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.

Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.

Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.

So how does this "Tax Credit" help you with a downpayment (since you don't get the money until AFTER you've bought the home and filed your taxes)? There are some states looking into offering short-term loans (i.e. a loan until you get your tax credit) and some people are going to employers or other sources to ask for this help. However, this may prove difficult as downpayment monies are typically not allowed to be "borrowed" funds. So, I had an idea involving removing all of your payroll witholding. This would allow you to save this money each month towards your downpayment. Then, when the taxes are due, up to $8,000 would be canceled out (or able to be repaid) by the tax credit. Check with your CPA for advice before adjusting your payroll witholding, but this may be just the thing to help save that downpayment this year. Just know that if you don't buy a home before Dec. 1 (and meet all other criteria of the First Time Homebuyer Tax Credit) you'll still owe all of those taxes to Uncle Sam. Rates are low and who doesn't want an extra $8,000? So, let's get house hunting!

Ryan Cave, The "Caveman"
Truth, Honor & Personal Integrity
214-789-9366
www.CaveRealty.com