On November 6, President Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 into law, extending and expanding the important home buyer tax credit, and thereby providing many Americans with just the break they need to buy a first home or move up to a new home.
One of the requirements for becoming a Member of the Top 5 in Real Estate Network® is to provide my community with critical real estate information so you can make the best possible decision when buying or selling a home. To that end, I wanted to pass along some key facts about the extended and expanded tax credit that are critical for you to understand in order to take advantage of this opportunity:
1. Eligibility: The tax credit is now available for first-time home buyers and eligible current homeowners. A first-time home buyer is an individual who has not owned a principal residence during the three-year period prior to the purchase. This law applies for both parties in a married couple; if you haven’t owned a home for three years, but your husband has, then neither one of you can qualify for the tax credit. A qualified current homeowner who wished to move to a different home, must have owned and resided in their residence for five consecutive years out of the last eight.
2. Salary requirements: Single taxpayers with incomes up to $125,000 and married couples with a joint income up to $225,000 qualify for the full tax credit. Single taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
3. Amount of credit: The maximum credit amount for first-time home buyers is $8,000; the maximum credit amount for current homeowners is $6,500. The federal tax credit amounts to 10% of the cost of the home, up to a maximum credit of $8,000 for first-time home buyers and $6,500 for current homeowners. Under the new legislation, a tax credit may only be issued for homes purchased for $800,000 or less. The tax credit is a true credit—it does not have to be repaid unless the homeowner sells or stops using the home as their principal residence within three years after the purchase.
4. It’s refundable: The tax credit is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if you owe no tax or the credit is more than the tax owed. The credit is claimed using Form 5405, which you file with your original or amended tax return.
5. Timeline. The credit is available for homes purchased on or after November 7, 2009 and before May 1, 2010. The federal income credit can be claimed on one’s individual or joint tax return for the purchase of any single-family home (newly-constructed or resale, single-family detached, townhomes or condominiums) between the dates of November 7, 2009 and April 30, 2010. Home purchases subject to a binding sales contract signed before May 1, 2010 will also qualify for the tax credit as long as closing occurs by June 30, 2010.
For more information on the home buyer tax credit, e-mail me or visit www.irs.gov. Please forward this email to friends and family who may also be able to take advantage of this unique opportunity to purchase the home they’ve always wanted.
As a Top 5 in Real Estate Member, I counsel many clients on a wide range of financial concerns, not just their real estate investments. As 2009 comes to a close, I wanted to alert you to some important information that could save you money come tax time.
In addition to the $8,000 tax break for first-time home buyers and the newly expanded tax credit that includes move-up buyers, new tax-relief bills passed in 2008 provide for a number of other tax breaks that may lower your 2009 tax debt. Plan now and review these breaks with your accountant to see if they could help reduce your tax liability in 2009 and beyond:
• Payroll Tax Credit. For 2009 and 2010, Congress gave workers a 6.2% credit on earned income, applied as lower income tax withholding (there are caps based on income). Recipients of Social Security, Railroad Retirement benefits or Supplemental Security Income, some federal workers, and veterans with disability pensions will get a one-time $250 check. Self-employed workers may be able to reduce quarterly estimated payments to get advance benefits.
• Larger Personal Exemptions. For 2009, each personal exemption you can claim is worth $3,650—up by $150 over 2008.
• Higher Standard Deductions. The standard deduction for married couples filing jointly rises to $11,400 up by $500 from 2008. For singles, the amount increases to $5,700—up by $250 over last year, and heads of households can claim $8,350, a jump of $350.
• Tax Credit for College Tuition. For 2009 and 2010, the Hope credit is replaced by a new credit of up to $2,500 per student a year for four years of college, not just the first two years. It now also covers the cost of books, but begins to phase out based on higher incomes.
• Child Tax Credit. If the credit exceeds the filer’s tax liability, all or part of the credit will be refunded if the filer earns more than $3,000 – down from $12,550 in 2008. (Also, for families with three or more children, the maximum earned income tax credit for 2009 and 2010 rises by $628.50)
Other changes that could affect you include higher income limits for deductible IRAs and Roth IRAs, higher estate tax and gift tax exemptions, credit for energy-saving home improvements, and partial exclusion of unemployment benefits.
To understand how the new tax breaks could save you money, consult with your financial advisor or e-mail me for more information. Be sure to pass this email along to your family and friends—in these tough economic times, we could all use a tax break!
As foreclosure numbers continue to rise, you might be one of the many homeowners worried about losing your home. The truth is, foreclosure can be prevented, however, most homeowners are too confused or afraid to confront their mortgage problems and, therefore, neglect taking the necessary steps to potentially save their homes. As a member of the Top 5 in Real Estate Network®, I have helped put many financially-challenged clients on the path toward avoiding foreclosure. The first and biggest step is always overcoming their fears.
Here are six of the most common foreclosure fears the Consumer Credit Counseling Service (www.cccsinc.org) encounters, along with the steps homeowners can take to overcome them and start taking action to save their homes.
Fear: Homeowners are afraid to let the mortgage company know they are having a problem because they think it will speed up the foreclosure process.
Contacting your lender must be the first step as it gives you a chance to explain why you have fallen behind on your payments and what steps you are taking to get back on track. Most lenders have a financial interest in keeping you in your home and may be willing to alter the terms of your loan or devise a repayment plan.
Fear: Homeowners believe that if their mortgage company has already turned them down for a loan modification, there is no point in contacting a counseling agency.
Many homeowners are turned down for a loan modification because the information they provide to their lender indicates that their expenses exceed their income or that they have not provided accurate documentation and information about their loan. A housing counselor may be able to suggest alternatives that better suit your current financial situation or help you make adjustments that make you a better candidate for a loan modification with your lender.
Fear: Homeowners fear being judged by others for seeking help.
These are challenging financial times. While it may feel like you are the only one struggling, the reality is that many of your friends and neighbors are also finding it difficult to stay afloat.
Fear: Homeowners think it is better to use all of their financial resources before seeking help.
Many homeowners try to ride out the financial storm, using their savings and depleting their retirement accounts before seeking help. By the time they do seek help, they are in an even more desperate financial situation and they have spent the resources that may have given them more options in dealing with their mortgage crisis.
Fear: Homeowners facing foreclosure fear that their situation is hopeless.
While for some, seeking help may mean saving their home, it is inevitable that some homeowners will end up in foreclosure. A certified housing counselor or real estate professional can help homeowners work through the foreclosure and build a new path for long-term financial success.
Fear: Companies claiming they can save your home charge large, up-front fees.
You can receive counseling from a reputable, nonprofit housing counseling agency at no charge. While there are unscrupulous businesses looking to take advantage of homeowners, there are also many HUD-approved housing counseling agencies that offer help for struggling consumers.
Please don’t let fear stand in the way of saving your home. Feel free to e-mail me for guidance on your specific situation and please pass this along to any friends and family members who may also need to confront these fears and get proactive.
RISMEDIA, November 2, 2009—The Senate has reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers, a boost the housing industry believes will help it pull out of its two-year-old downturn.
While its passage remains uncertain, the agreement would extend the existing credit for first-time homebuyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years. Lawmakers in Washington also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000, housing-industry sources said. Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, said the sources. The measure still faces votes in the full Senate and the House.
Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan are in full support of the Senate’s proposal to both extend and expand the first-time homebuyer tax credit and called on Congress to approve key housing measures that include the tax credit. “We welcome efforts taken by Congress to extend the First-Time Homebuyer Tax Credit for a limited period. This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide,” said Secretaries Geithner and Donovan. “In extending the credit, we urge Congress to include strict measures to combat tax fraud and protect responsible homeowners.”
The current tax credit did little for the new-home market in September, the Commerce Department recently reported—news that took many industry analysts by surprise. Sales fell 3.6% from August and 7.8% from September 2008. Industry observers had expected a fifth consecutive monthly increase in new-home sales, believing that the tax incentive for qualified first-time buyers—credited with 357,000 sales of previously owned homes so far this year—would do the trick. Instead, sales of typically more expensive newly built houses slipped. “The decline in new-home sales seems to us to be more a function of the attractive pricing available on resales in the current environment than a reflection of weakening demand,” said Michael Feder, president of Radar Logic in New York, which tracks the market.
“Since hitting rock bottom in March, demand is up 20 percent,” said Joel L. Naroff of Naroff Economic Advisers in Holland, Pa. For Naroff, the robust rise in existing-home purchases—9.2% year over year in September—indicated that the housing market was not faltering. “Maybe the issue is supply, which fell to its lowest level in 27 years,” he said. “Builders, at least those left standing, have been making sure they don’t have any houses sitting around, and they have been very successful in controlling inventories.”
IHS Global Insight economist Patrick Newport echoed that, noting new-home inventories “sank for the 29th straight month to their lowest level since November 1982.” Naroff maintained housing has recovered enough to stand without the tax credit, but Newport said that if the credit were not extended and expanded, housing demand would take a hit, and home sales would drop.
The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real estate market a bigger boost while preventing real estate investors from benefitting. While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor.
(c) 2009, The Philadelphia Inquirer.
