|
HOT OFF THE PRESSES!! IMPORTANT UPDATE!!!
Just on Friday, President Obama signed into law a bill that extends unemployment benefits and the First Time Home Buyers tax credit, which is also being expanded to include benefits for homebuyers who aren't on the first time around buying a home. If purchasing a home is in the cards for you or anyone you know, you can get all the details of the homebuyer's tax credit in this week's Mortgage Market Guide View article below | The Mortgage Market View...  |
|
| | | | Homebuyer Tax Credit Extended and Expanded! Last week, a new Homebuyers Tax Credit bill was signed into law. The bill extends the tax credit for first-time homebuyers (FTHBs), as well as opens it up to current homeowners who are looking to buy. And even if you aren't looking to purchase - pass on this article to anyone you think might be in the market to do so. This is information that might benefit them greatly, and I'll be happy to be of service to them. Here is a brief overview of the Homebuyers Tax Credit - and its benefits - based on the new bill. Tax Credit for First-Time Homebuyers FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000. Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount. Tax Credit for Current Homeowners The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years. Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount. What are the New Deadlines? In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in the military do have some special extensions on the timelines available. What's So Great About a "Tax Credit"? The benefit of a tax credit is that it's a dollar-for-dollar benefit, rather than a "tax deduction", or reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer who qualified for the entire benefit were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing. Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little or no income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000! Higher Income Caps The amount of income someone can earn and qualify for the full amount of the credit has been increased. Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible. Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible. Maximum Purchase Price Qualifying buyers may purchase a property with a maximum sales price of $800,000. Remember, the new tax credit program includes a number of details and qualifications. Call or email today if you have questions or would like to see if you can benefit from the tax credit...and email this article along to anyone else you feel it might benefit as well! | |
______________________________________________________________________________________________
The IRS has just released a new form (Form #5405) to deal with the new $8,000 tax credit and it appears buyers WILL be able to claim the credit on their 2008 taxes if they close on a home prior to submitting their 2008 taxes (on or before April 15, 2009).
As always, it is best to consult a tax attorney or CPA for verification on whether the credit can be claimed on your 2008 taxes. Based on reviewing the new form, it appears to me that a home purchased in 2009 will be eligible for this credit in the filing of tax returns for 2008's income (See "Homes purchased in 2009"). Thus, it may be possible that the $8,000 (Non-repayable) tax credit could more than offset the 3.5% investment necessary for down payment - even before the purchaser's first house payment becomes due. As with most closings in March, the buyer's first house payment would not be due until May 1st. Additionally, a first-time home buyer could put $2,800 down on a $80,000 home (3.5%), and receive the $8,000 tax credit after filing their 2008 Federal tax return before April 15th, 2009.
Below is a chart to help understand the changes with the bill being signed tomorrow by the President. Call me with any questions. 231-238-4820 ext 16
FEATURE | CREDIT AS CREATED JULY 2008 APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008 | REVISED CREDIT ? EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009 | Amount of Credit | Lesser of 10 percent of cost of home or $7500 | Maximum credit amount increased to $8000 | Eligible Property | Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence. | No change All principal residences eligible. | Refundable | Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser. | No change Purchasers will continue to receive refund for unused amount when tax return is filed. | Income Limit | Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000). | No change Same income limits continue to apply. | First-time Homebuyer Only | Yes. Purchaser (and purchaser´s spouse) may not have owned a principal residence in 3 years previous to purchase. | No change Still available for first-time purchasers only. Three-year rule continues to apply. | Revenue Bond Financing | No credit allowed if home financed with state/local bond funding. | Purchasers who utilize revenue bond financing can use credit. | Repayment | Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing. | No repayment for purchases on or after January 1, 2009 and before December 1, 2009 | Recapture | If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale. | If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009. | Termination | July 1, 2009 (But note program changes for 2009) | December 1, 2009 | Effective Date | Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year. | All revisions are effective as of January 1, 2009 |
Tax Credit for Homebuyers
First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income. The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years. Tax Credit Versus Tax Deduction It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.
Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000! Phaseout Examples According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.
To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:
Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800. For those tracking the math in the examples above, you may be wondering where the “$20,000” came from—that is, why you divide “$10,000 by $20,000” in the first example and “$13,000 by $20,000” in the second example. Here’s where the $20,000 comes into play: The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts. In other words: • $170,000 – $150,000 = the $20,000 in the first example
• $95,000 – $75,000 = the $20,000 in the second example Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances. Homes that Qualify The tax credit is applicable to any home that will be used as a principal residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principal residence also qualify. Contact Me Now to Begin your Home Search! With Low House Prices, Low Interest Rates, & Now up to $8,000 in Tax Credits, It Is the Time to Buy a House! Matt Stahl 231-238-4820 or 231-881-4522
|
Business (231) 238-4820 (16)
Equal Housing Opportunity