Penny Seeds

I was originally very critical of the new ‘tax credit’, because of the wording which lead people to believe it was free money. While I am in the market for a new home in the time period where it’s claimable - I’d thought about NOT doing so just, because it’s a loan, and not really a ‘credit’. I’ve been thinking about it more, and I’ve come up with this list of things you could use a $7,500 interest free loan for!

The first thing you should know about this credit is that it is not free money. You have to pay it back to the government over the course of 15 years. This is a little ‘bonus’ for first time home buyers. While it seems less appealing that you don’t get to keep it; the small fact of ‘interest free’ is still tasty for your wallet. Here’s a list of some things I came up with that you could use that credit for.

Home Improvements

You got a new home for a steal, but it needs some fixing up. By claiming your credit you can purchase any materials, labor, ect. you need to fix up your new digs. Replace the carpeting, fix up the cabinets, or even buy some paint!

Payoff Credit Cards/loans

Since this is an interest free loan you could also use it to pay off some of that pesky credit card debt you might be carrying. You’ll get through it much faster without the interest piling up on top of you, and save a lot of money in the long run. Assuming you have a fairly standard 18% interest rate you’ll save $1,620 a year in accruing interest! The payment for your interest free loan will be about $42 a month (paid yearly at $500) - So that gives you $1,120 to invest in something better than eternal debt! Even if you can’t pay ALL your debt with the credit; it will still help you out to relieve some of the burden.

Down Payment On A Car

If your vehicle barely gets you to work, but you didn’t have the green to buy a car you could cash in on your credit, and use it for some new wheels. If you buy a less expensive used car your vehicle could be totally paid for by your ‘tax credit loan’ for that same $42 a month.

Small business loan

If you’d been wanting to start up a business, but are short on funds you could use your credit to give you a kick start on some of your materials. ie. equipment to start your own lawn business, rent, advertising, ect.

School loan

The cost of higher education is getting more expensive by the day, but you could use your credit to get in on the act. If you’re looking to take some technical courses or even some college classes this could be a more affordable way for you to at least partially finance your academic  tuition, books, supplies, and anything else you need.

Investing/saving

Since the loan is interest free then any gain you make over the $7,500 capital in 15 years is yours to keep. You could drop the money into an interest bearing account, stocks, bonds, ect. Simply pay the $500 a year you owe, and keep anything else you make as profit for yourself. At a 5% interest rate over 15 years your investment will grow to $15, 591.96 with no additional money from you. That means you made over $8,000 in profit from the loan after paying back what you owe Uncle Sam. If you contribute your own money to that compounding amount of just $50 a month then you’ll end up with $29,186.46 in 15 years minus your $7,500 that leaves you $21,686.46 for whatever!

Furniture

While buying new furniture is not the most economical option on the list; if you’re currently using a tide box coffee table it might be a good idea anyway! If you spent all your extra cash on closing costs then you could use some of your credit to furnish your new house. If you need furniture, but still don’t want to spend a fortune try places like craigslist or consignment shops.

Repairs

If your home, car, air conditioner or other important item is in need of some costly repairs you could use this money to get the job done. If the check engine light is on it might be a good idea to take care of it before it gets very costly. Problems tend to not go away when ignored.

There are rules for claiming this incentive. You have to be a first time home buyer, but their definition is that you must not have owned a primary residence in the past three years. So, even if you’ve owned before, and you’ve been renting for the three year period you can claim it on a new home. Likewise if you are renting, and own a vacation or a rental property you can still claim it as well. I’m thinking I’ll claim it, and either invest it in something or maybe spend it on some improvements to my new house.

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