If the beneficiaries of this credit can avoid the temptations of a lavish vacation or a pricey shopping spree and make wise, calculated decisions, the actual value of the tax credit could add up to much more than the initial amount.
Columbia, MD (Vocus/PRWEB) March 16, 2011
As Americans are filing their income taxes, data from the Government Accountability Office indicates that hundreds of thousands of families and individuals are positioned to receive a federal homebuyer tax credit. While many will be tempted to spend that money on furniture, electronics or vacations, the personal finance experts at CareOne Services Inc. recommend that other options be considered first.
The federal government launched the most recent homebuyer tax credit program in 2009 as a way to stimulate the declining housing market. People that put a home under contract by April 30, 2010 and closed on the house by September 30, 2010 are eligible for a tax credit of up to $8,000 for first-time home buyers and up to $6,500 for repeat home buyers.
This significant cash infusion for families begs the question: What will consumers do with the extra money?
“Recent homebuyers are presented with a great opportunity to get ahead financially with this tax credit,” said Jenny Realo, a CPA and the executive vice president of CareOne, one of the nation’s largest providers of debt relief services. “If the beneficiaries of this credit can avoid the temptations of a lavish vacation or a pricey shopping spree and make wise, calculated decisions, the actual value of the tax credit could add up to much more than the initial amount. The key is weighing the different options and taking the time to think before spending.”
With so many ways to spend the tax credit, Realo urges homeowners to get more from the money by making wise decisions. Some of her recommendations are:
- Apply the credit to the mortgage principal (or any other debt): Applying money to the principal of the loan won’t only depreciate the balance and add equity to the home, but $8,000 applied to the principal will also knock off thousands of dollars in interest. That same money could also be used to pay down other debts such as credit cards, college loans or personal loans. Both options decrease debt and save money by decreasing interest charges.
- Add efficiency to the home: Aesthetic improvements generally add to a home’s overall value, but the homeowner may not cash in on those improvements until the sale of the home. Energy improvements, however, are a different ballgame. Investing in energy-efficient appliances or installing new windows or installation will not only add to the home’s value, but will provide an immediate reduction in utility costs, Realo said.
- Save it: Whether it is in a simple savings account, a CD, a college savings account or a retirement fund, the money will be earning interest and growing. If the money is put into different types of accounts, it is best to keep a portion in fairly liquid form, like in a savings account, to access in case of an emergency.
“Consumers who are eligible for this tax credit have the opportunity to use it to have a long-term and positive impact on their finances,” Realo said. “I hope that everyone will take some time to think about what they plan to do with this money in order to receive the greatest benefit and not just the most immediate satisfaction.”
CareOne Services Inc. is a debt relief company formed in 2002 to provide consumers with multiple solutions to complex money issues. CareOne takes a holistic approach to assisting customers in debt and reviews each situation to create achievable financial solutions. CareOne’s services include credit counseling, debt management, debt settlement, as well as free referrals to bankruptcy attorneys if that is in the best interest of the consumer.
CareOne also provides the CareOne Community (Community.CareOneCredit.com), a free online resource for consumers that includes educational tools, blogs and forums where more than a million people share their experiences and receive support from others in similar situations.
Headquartered in Columbia, Md., CareOne has helped more than 2 million people. In 2010, it provided consumers with the tools and assistance to pay down more than $385 million in debt.
CareOne provides services in 41 states. For more information, call 1-800-373-3225 or visit CareOneCredit.com.
For The Media
For more information on CareOne Services Inc. and the debt relief industry, visit http://www.careonedebtinsights.com or call (336) 505-9312.