U.S. FIRST-TIME BUYER CREDIT Just One of Many Buyer Incentives in Chicago, Across IL!
CHICAGO "TAX SMART," ILLINOIS MORTGAGE CERTIFICATE CREDIT PROGRAM ALLOWS FIRST-TIME BUYERS TO DEDUCT UP TO $2,000 FROM FEDERAL INCOME TAX OWED!
Last Summer, one of the key provisions of the U.S. Housing Relief Bill, a maximum $7,500 direct tax credit for first-time homebuyers, created a bit of a buzz.
This credit, however, is not a gift - it must be repaid, through higher tax payments, and interest free, over 15 years, or when the subject first home is sold. If paid over the full 15 year repayment period, the maximum loan amount would result in a $500 annual tax credit repayment.
Most first time homebuyers qualify for the credit, so long as your total household income is less than $75,000 (for single taxpayers), or $150,000 (for couples filing jointly). There is also a time limit to the credit - it only applies to homes purchased between April 9, 2008 and July 1, 2009.
According to Rob Dietz, Director of Tax for the National Association of Home Builders, the average first-time buyer pays $5,000 in federal income tax. If this is the case, the typical first-time buyer could pay no taxes in the year immediately the home purchase, and still reduce taxes another $2,500 the next year.
Certain local incentives have lower income ceilings. In some cases, these local program incentives cannot be used if the Federal credit is elected. This is the case with the Chicago Tax Smart Mortgage Certificate Program, as well as the Illinois I-Loan.
In Chicago, first-time homebuyers (and non-first timers in certain targeted city neighborhoods), can enjoy a direct income tax reduction of up to 20% of mortgage interest paid, up to a maximum of $2,000 each year, for as long as you own your qualifying home. The maximum allowable family income, for a family with three or more people, is $105,560 in city-target neighborhoods, $86,710 in non-targeted city neighborhoods.
In tax areas, the maximum single-family home purchase price to qualify is $398,315 in targeted areas, $325,894 in non-target neighborhoods across Chicago.
Here's more information on the City of Chicago Tax Smart Mortgage Certificate Program.
The I-Loan Program is similar, for houses throughout Illinois.
Other Chicago-area communities have special Down Payment Assistance Programs available for buyers that purchase their new home within their communities. These incentives CAN BE COMBINED with the Federal First Time Homebuyer Incentive Program.
In Kankakee, about 50 miles south of Chicago, the city offers as much as $7,000 down payment grants, and up to $1,500 in closing cost credits, to first-time buyers in their community. The family income ceiling, however, is comparatively low - $48,650. This Down Payment Assistance Program, however, can be used in combination with the U.S. First Time Homebuyer Credit.
Both the Chicago and IL Programs offer lender contacts who offer slight discounts on mortgage interest rates. In some cases, these local and state programs do not have to be repaid.
However, both programs include Recapture Provisions - if the subject property is sold within nine years, at a profit, and the owners' household income increases beyond a maximum level allowed, the buyer may have to pay a pro-rated portion of the tax credit earned.
Read more in Marilyn Kennedy Melia's story in last Sunday's Chicago Tribune Real Estate Section.
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