Homebuyer Tax Credit Update!
On November 6, 2009, President Obama signed a bill to extend the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time.
TAX CREDIT OVERVIEW - EXTENSION (posted 11/9/2009)
Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (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.
Current Owners: 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.
What are the 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.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
How Much are Current Home Owners Eligible to Receive?
The tax credit program includes 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.
Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:
So will the expanded tax credit help sales?
Absolutly.... In true trickle down (in this case up) economics first time homeowners purchase your house, you purchase the dream home down the street, they purchase a house on Lake Rabun in north Georgia with my brother www.lakeburtonrabun.com . Experts agree out of all government programs attempting to jump start the economy (including cash for clunkers) the first time home owners tax credit has produced the best results. For more information email JeffBarnwell@remax.net
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History of the program
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Old news on last years program:
The new tax credit for home buyers is a great deal, if anyone can actually figure it out. Leave it to Congress to put the language in such fine print that most homebuyers have to hire an expert to understand it.
A quote by Tom Herman, “If you meet certain qualifications, such as closing on a home from Jan. 1 through Dec. 1st, 2009, you may be eligible for a tax credit of as much as $8,000. You also have a choice of claiming the credit on your federal income-tax return for 2008 or 2009. A credit is typically more valuable than a deduction, since it eliminates your taxes on a dollar-for-dollar basis — and in this case, you may get it even if you don’t owe any taxes.”
The following questions and answers were published in the Wall Street Journal recently and for those of you that didn’t see the article, I decided to post them here, since this is a hot topic. These questions and answers are taken directly from the article which was published, March 18, 2009, “Cracking a Valuable Homebuyer Credit” by Tom Herman. I am not a tax expert but merely sharing this information with you, please seek tax advice from a tax expert.
Here are answers from IRS officials and tax advisers to some questions about the credit.
Q: Who can claim the credit?
A: In general, the IRS says you may be eligible if you bought your main home, located in the U.S., after April 8, 2008, and before Dec. 1, 2009 — and if you (and your spouse, if you’re married) haven’t owned any other main home during the three-year period ending on the date of purchase. That means you might be eligible even if you owned a home for many years before that period.
Q: How much is the credit?
A: That depends on when you bought the home and other factors, such as your income and the home’s price.
If you bought during the 2008 period and qualify for the credit, the maximum credit is generally $7,500. But it’s only half that amount if you’re married and filing separately from your spouse. Even though it’s called a credit, it’s really an interest-free loan. You generally have to repay it over a 15-year period, without interest, in 15 equal installments, the IRS says. (There are several exceptions to this repayment rule. We warned you this was tricky.)
The rules are more generous if you buy a new home during the 2009 period and meet all the qualifications. In that case, the maximum amount generally is $8,000, or half that amount if you’re married filing separately. More important, you don’t have to repay the credit at all unless that home “ceases to be your main home within the 36-month period beginning on the purchase date,” the IRS says.
Initially, there was some confusion about whether the $8,000 maximum credit would apply if someone bought a home in 2009 and chose to claim the credit on their return for 2008. It’s now clear the $8,000 maximum limit does indeed apply, says Mark Luscombe, principal tax analyst at CCH, a Wolters Kluwer business. Naturally, though, “this doesn’t help people who actually bought homes in the 2008 qualifying period, and who are limited to a $7,500 credit that must be repaid,” he says.
Additionally, the credit generally is limited to the amounts mentioned above — or 10% of the home’s purchase price, whichever is less. For example, if you bought a new home this year for $70,000, the maximum amount of the credit would be limited to 10% of that amount, or $7,000
Q: How do the income limits work?
A: You may be eligible for the full amount of the credit if your adjusted gross income, with certain modifications, is $75,000 or less — or $150,000 or less if married and filing jointly. However, the credit begins to disappear, or “phase out,” if your income exceeds those amounts. You can’t claim the credit at all if your income is $95,000 or more, or $170,000 or more if married and filing jointly, the IRS says
Q: What if I built a new home? How does that work?
A: You are considered having purchased it “on the date you first occupied it,” the IRS says.
Q: I own more than one home. How do I figure out which is my “main” home? And does it have to be a house?
A: The IRS says your main home is “the one you live in most of the time.” No, it doesn’t have to be a house. It can be “a house, houseboat, house trailer, cooperative apartment, condominium, or other type of residence.”
Q: Are there are other qualifications?
A: Yes. You can’t claim it if your home is located outside the U.S. You also aren’t eligible if you’re a nonresident alien, if you inherited the home or got it as a gift, or if you acquired it from a “related person,” such as your spouse, parents or grandparents.
Q: Will the credit help me if I don’t owe any tax?
A: Yes. The credit “may give you a refund” even if you owe no tax, the IRS says.
Q: What form do I use?
A: Form 5405. The IRS recently revised it and posted it on its Web site (www.irs.gov), along with instructions. Dean Patterson, an IRS spokesman, says “programming is being done to electronically process Form 5405″ to claim the $8,000 credit for homes bought in 2009. The IRS “will be able to process these returns electronically beginning March 30″ this year, he says.
Q: Where do I put the credit on my Form 1040?
A: Line 69.
Q: I’ve already filed my return for 2008. Can I still claim it? If so, how?
A: Yes. File what’s known as an “amended” return. Use Form 1040X, and attach Form 5405.
Q: If I buy this year, should I claim the new credit on my 2008 or 2009 tax return?
A: That can be tricky, and you may need to consult a tax pro. In general, most people who buy this year and qualify for the new credit probably will want to take it on their tax return for 2008, says Tax Mam’s Claudia Hill. “They’ll get their money more quickly,” she says.
But some people might be better off claiming the credit on their 2009 returns. These would include eligible homebuyers who buy this year, whose financial circumstances changed during 2009 and who might qualify for a larger credit on their returns for 2009 than the prior year. An example would be someone whose income was too high to get any of the credit for 2008 but who recently lost his job and thus would be eligible for the full credit on his 2009 return, to be filed next year.
For more information on properties that qualify for this program please contact...
Jeff Barnwell
770-990-0743
Congress set to expand homebuyer tax credit
By STEPHEN OHLEMACHER (AP) – 11 hours ago
WASHINGTON — Buying a home is about to get cheaper for a whole new crop of homebuyers — $6,500 cheaper.
First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the Senate voted Wednesday to extend and expand the tax credit to include many buyers who already own homes. The House is scheduled to vote on the bill Thursday.
Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.
"This is probably the last extension," said Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits.
The homebuyers tax credit is one of two tax breaks totaling more than $21 billion that the Senate included in a bill extending unemployment benefits for those without a job for more than a year. The other would let companies now losing money recoup taxes they paid on profits earned in the previous five years.
"We are still in a world of economic hurt, and Congress must continue to act boldly and creatively," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. "With the right mix of tax breaks and investments we will get through this recession and get folks working again."
The real estate industry has been pushing to extend and expand the housing tax credit. About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. While the measure passed the Senate by a 98-0 vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.
"For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home," Bond said. "And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."
The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.
The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.
Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.
The business tax break would allow money-losing companies to use current losses to offset taxable profits earned in the previous five years, giving them refunds of taxes paid in those years. Under current law, businesses with annual gross receipts of more than $15 million can claim losses back only two years.
The tax break would help industries suffering losses in 2008 or 2009, including retailers, homebuilders and newspapers. Congress included a scaled-back version of the tax break — for companies with revenues of $15 million or less — in the economic recovery package enacted in February. The new tax break would be available to companies of any size, providing a quick source of cash.
The U.S Chamber of Commerce has been a big backer of the tax break for money-losing companies.
"It frees up capital that they can use to maintain jobs and potentially even hire new people as the economy returns," said Caroline Harris, senior tax counsel for the U.S. Chamber of Commerce.
The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.
