First-Time Homebuyers Could Cut Up to $2,000 Off Their Taxes

FNB-Fox Valley, WHEDA tax credits,

A new program by WHEDA could save first time home buyers up to $2,000 in federal taxes.

If you’re looking to buy your first house in the Fox Valley, the range of programs that’ll help you move from being a renter to being an owner just got a little better.

A new program announced earlier this month makes it possible for qualified first-time homebuyers in the Fox Valley to trim as much as $2,000 a year off their federal taxes using a new tax credit.

The Wisconsin Housing and Economic Development Authority, or WHEDA, is expected to rollout the new program by April 1, which will provide a federal tax credit worth up to 25% of the annual mortgage interest paid by a homeowner.

That means if a first-time homeowner pays $4,000 in mortgage interest for the year, the tax credit would be $1,000. In addition to the tax credit, if that homeowner also files an itemized tax return, they can claim the other $3,000 in mortgage interest costs as a deduction.

The credit is capped at $2,000 per year, but borrowers may claim it for up to 30 years if they’re still paying interest on the original mortgage.

A larger tax credit up to 40% of mortgage interest costs is available for veterans and those who buy homes in areas of the state WHEDA has targeted.

The tax credit program will be available to new homebuyers if their mortgage loan comes from a bank that participates in the WHEDA program. The FNB-Fox Valley mortgage team uses WHEDA loans as one of its many mortgage loan options, and will be incorporating this new program as soon as it’s available.

Of course, there are rules about who is eligible for the credits. Homebuyers must:

  • Meet annual income limits specified by WHEDA rules. (For a one- or two-person household, the limit is $70,739 to $96,927. For larger households, the limit is $81,350 to $111,466, depending on location)
  • Be a “first-time” homebuyer, which means no home purchases in the prior three years
  • Get a fixed-rate mortgage, with no prepayment penalties or balloons
  • Buy a house for no more than $235,000. (Or $280,000, using the 40% credit for veterans or in targeted areas)

If you’re in the market to buy your first home in the Fox Valley, this is an option you should discuss with your banker to see if it’s right for you. For more information about WHEDA loans and other mortgage options, visit with the FNB-Fox Valley mortgage team.