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$8,000 tax credit helps homebuyers

If ever there was a good time for someone to buy a house in Door County, it’s now.

The Door County housing market is full of property owners wanting to sell their homes. On top of a buyers’ market, the American Recovery and Reinvestment Act signed by President Obama Feb. 17 unleashed federal money for the benefit of new homeowners in the form of a First-Time Homebuyers Tax Credit. This credit virtually guarantees any new homebuyer who has not purchased a home in the last three years an $8,000 tax credit if they buy a home before Dec. 1, 2009.

Of course, there are stipulations.

First, a short history. In 2008, Congress adopted a First-Time Homebuyers Tax Credit that allowed couples or individuals to acquire a tax credit of up to $7,500 or 10 percent of the cost of the home. The government required 2008 homebuyers who used the credit to pay it back over 15 years, making it a no-interest loan. Sturgeon Bay resident Justin Kerwin purchased his fixer-upper for $45,000 in Oct. 2008 and debated taking the tax credit, but chose not to because he would have to pay it back.

“I had saved all the money I needed to close on the house and maintain it, so I didn’t feel like I needed to borrow money,” Kerwin said.

Changes in the 2009 legislation make paying back the tax credit a thing of the past. The National Board of Realtors petitioned Congress in 2008 to remove the repayment requirements, extend the credit until the end of 2009, and increase the credit to a maximum of $8,000 or 10 percent of the purchase price of the home. Cynthia Patterson, a real estate agent with Coldwell Banker and president of the Door County Board of Realtors, said new homeowners who already filed their 2008 taxes can still take advantage of the tax credit on last year’s returns by filing a tax amendment.

“Being able to afford a home is one thing, but being able to get help on buying, that tax credit is the icing on the cake,” Patterson said. “The credit has made a huge difference. People can now receive three things when buying a home: good interest rates, good loan rates, and now this tax credit. People will do a lot with that cash, which will help stimulate the economy. I think the trades will really see a benefit from this.”

Couples or individuals in the process of building a home can also qualify for the credit, as the first day you occupy the home is considered the purchase date.

To qualify as a first-time homebuyer, an individual or couple cannot have individually or collectively purchased a principal residence in the three years prior to a new home purchase. A refundable tax credit means that if the homebuyer can claim a total tax liability of less than $8,000, the IRS will send a refund for the balance of the credit. Couples who make more than $150,000 or individuals who make more than $75,000 may be eligible for a reduced credit.

Fish Creek-based real estate agent Connie Erickson said the sale of a house in northern Door County is taking an average of three years. She advised anyone looking to buy a home to take advantage of the tax credit.

“People are still afraid [of the market] and, rightfully so, this has hurt everyone,” Erickson said. “I don’t think there’s one answer to spur everything to get going again; it requires patience and we have to be more positive.”

Qualifying for the full refund was an easy part of buying their first house together for soon-to-be-married Jackie Perez and Tory Piche of Green Bay. Perez and Piche were each living in their own apartments after moving to Green Bay from Savannah, Georgia, until they got a second dog together. Real estate agent Cynthia Patterson helped them find their new home.

“A lot of apartments don’t accept dogs, so we decided to combine our things, basically for the dogs,” Perez said. “It was good timing for us, with the market in favor of house buyers. We checked out buying a home, and it wasn’t much more expensive than the two apartments we were renting.”

Perez, who works for Foth & Van Dyke LLC in Green Bay, heard about the tax credit on the news and through a co-worker. The couple paid $174,000 for their home. Using an online tax program, Perez said applying the tax credit to her income taxes was easy and the tax-filing program walked her through the process. The couple is going to use some of the money to build a fence for their dogs in their new backyard.

“I think [the credit] is coming at a good time to help a lot of people,” Perez said. “Maybe the extra incentive will make up people’s minds, if they were on the fence about [buying a house]. It’s a light at the end of the tunnel. Yeah you get debt, but it’s an extra option to apply it to what you need to pay off bills.”