What should a smart home buyer do with that fat federal tax rebate check?
Well, it's not THAT fat, but it could come in handy for buyers before, during and after the home buying transaction.
Starting in May, the U.S. Treasury Department will begin sending rebates to taxpayers, who had $3,000 of income and filed a 2007 tax return and have a valid Social Security number. Eligible taxpayers will receive up to $600 ($1,200 for married couples). Parents will receive an additional $300 for each eligible child younger than 17.
If you are a retiree, disabled veteran or low-wage worker who is otherwise exempt from filing a tax return, you must file a tax return this year in order to receive a rebate.
The rebate -- both the basic component and the additional funds for qualifying children -- begins to phase out for individuals with adjusted gross incomes (AGI) over $75,000 and married couples who file a joint return with AGI over $150,000. The combined payment is reduced by 5 percent of the income above the AGI thresholds.
You can estimate what your tax rebate take might be with the Economic Stimulus Payment Calculator online.
And here are a few things you ought to consider doing with that unexpected windfall, if you are a home buyer -- before, during and after your home purchase.
Save it. If you don't have that three to six months-worth-of-income emergency savings fund, now's a good time to begin. Stuff happens around the home when you least expect it. And you'll need some pocket money for incidentals during your home purchase. Look for a savings account that offers the best return. Online bankers generally offer the best interest rates, but shop around for other liquid savings, checking or investment accounts you can start up for the amount of your rebate.
Rent a safe deposit box. After you buy a home, you'll need somewhere to securely stash all those important documents including your mortgage note, title and escrow papers, insurance policies, home improvement contracts, tax returns and estate documents. In many cases, the rebate will give you enough cash to rent a safe deposit box for decades. The boxes cost from $10 to $100 a year, plus a key deposit. If you sock the cash in an interest-bearing account and let the bank automatically withdraw the fee each year -- or do it yourself manually -- you'll earn a small return in the process.
Buy a home inspection. Even if the seller offers his or her own inspection you want your eyes on the prize as well. Home inspections are good deal for resale, as-is (so that you know what "as-is" is) listings and new home purchases as well, given the possibility of new home defects. If your inspection costs only a few hundred dollars and you get a rebate for $600 or more you can save a portion of the rebate for an inspection years down the road, say when you want to check the condition of your home, put it on the market, or to inspect the next home you buy.
Buy enough homeowners insurance. For small homes, condos and townhomes the largest rebates available will cover many policies for a year. That doesn't mean only buy what your rebate can afford. Make sure you buy enough replacement value coverage. If you work at home, use the rebate to buy extra business coverage as well as special liability coverage for your business.
Complete deferred "green" maintenance. Caulk the windows and doors. Add insulation. Have your furnace or HVAC (heating-ventilation-air conditioning) system inspected and cleaned. Swap out incandescent bulbs for CFLs (compact fluorescent lamps) and otherwise make your home more energy efficient and you'll get your money back from savings on utility costs.
Splurge, but shop around. The real purpose of the tax rebate is to get you to spend money on stuff in the retail sector that will help kick-start the economy. If, after buying a home, you have you financial basics covered, shop around for the best deals at the lowest cost on goods and services for your home. For example, for around $1,000 Consumer Reports found Panasonic, Samsung and Sony offering the best 32 inch LCD TVs and LG, Samsung and Hitachi offering the best 42 inch plasma models. The key is to get the most "stuff" for your money.
Buy quality services. Likewise Consumer Checkbook, for a subscription fee of $34 for two years, will give you ratings on good service workers. The independent rating service is affiliated with and somewhat like Consumer Reports, except it rates services rather than goods in seven metropolitan areas. There are other local consumer service groups and so-called rating services but none of them offer the scrutiny provided by Consumer Checkbook. Among services to consider before and after moving into your new home, Checkbook offers ratings on appliance repair, carpet & rug cleaners, fence builders, home security firms, house cleaning services, plumbers, roofers, tree care specialists, window washers and a lot more.