Extended Home Buyer Tax Credit 2009/2010

Bringing the Dream of Homeownership Within Reach

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:

• Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.


• Expands the credit to grant a $6,500 credit to current home owners purchasing a new or existing home between the date the bill is signed by President Obama and April 30, 2010.

Here is more information about how the Extended Home Buyer Tax Credit can help prospective home buyers become part of the American dream.

Who Qualifies for the Extended Credit?

• First-time home buyers who purchase homes between the date the bill is signed by President Obama and April 30, 2010.


• Current home owners purchasing a home between the date the bill is signed by President Obama and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.

If you purchased a home between January 1, 2009 and the date the bill is signed by President Obama, please see: 2009 First-Time Home Buyer Tax Credit.

Which Properties Are Eligible?

The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.

How Much Is Available?

The maximum allowable credit for first-time home buyers is $8,000.

The maximum credit allowed for current homeowners is $6,500

How is a Buyer's Credit Amount Determined?

Each home buyer’s tax credit is determined by tow additional factors

1. The price of the home.


2. The buyer's income.

Price
Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

Buyer Income
Under the Extended Home Buyer Tax Credit which is effective on the date the bill is signed by President Obama single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.

These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits. If you or your client purchased a home between January 1, 2009 and the date the bill is signed by President Obama, please see 2009 First-Time Home Buyer Tax Credit.

If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?

Yes, some buyers may still be eligible for the credit.

The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.

The modifications in the column labeled “December 1 – April 30, 2010” become effective when President Obama signs the bill. All changes made to the current credit become effective on that date, as well.

For more information visist my website at http://www.michelashomes.com/.

Congress giving homebuyers a $6,500 tax break

By STEPHEN OHLEMACHER, Associated Press Writer Stephen Ohlemacher, Associated Press Writer Thu Nov 5, 3:38 am ET
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 buyers who already own homes. The House could vote on the bill as early as 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, D-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.
___
The bill is H.R. 3548.
___
On the Net:
Congress: http://us.rd.yahoo.com/dailynews/ap/ap_on_go_co/storytext/us_homebuyers_tax_credit/33976198/SIG=10nr4q2o3;_ylt=AseOfG5T6RMS5.ALJT0m7JXs.6F4;_ylu=X3oDMTFobGc5MjF2BHBvcwM0BHNlYwN5bl9zdG9yeV9wcmludF9jb250ZW50BHNsawNodHRwdGhvbWFzbG8-/*http://thomas.loc.gov

8 Steps to Buying your Home

“Let a team of real-life experts share their real estate wisdom along with heartwarming stories to show you how to achieve the dream of home ownership. I wish I had this information when I bought my first home. The good news for you? You can!"

-Bob Burg, Author of Endless Referrals and co-author of The Go-Giver

• Chapter 1: Decide to Buy


• Chapter 2: Hire Your Agent


• Chapter 3: Secure Financing


• Chapter 4: Find Your Home


• Chapter 5: Make an Offer


• Chapter 6: Perform Due Diligence


• Chapter 7: Close


• Chapter 8: Protect Your Investment


• About the Book

Chapter 1: Decide to Buy

• Purchasing your own home is a great investment that provides specific financial advantages, including equity buildup, value appreciation potential, and tax benefits. (It’s also a forced savings plan that you cannot get from renting!)


• Done right, home ownership lays the foundation for a life of financial security and personal choice.


• There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run.


• Here’s the most important rule for keeping your stress to a minimum: you don’t have to know everything.

Chapter 2: Hire Your Agent

• When looking for an agent, know that above all else good agents put their clients first.


• Your real estate agent will perform seven main roles:

1. Educate you about your market.


2. Analyze your wants and needs.


3. Guide you to homes that fit your criteria.


4. Coordinate the work of other needed professionals.


5. Negotiate on your behalf.


6. Check and double-check paperwork and deadlines.


7. Solve any problems that may arise.

Chapter 3: Secure Financing

• Follow these six steps to financing your home:

1. Choose a loan officer.


2. Make a loan application and get preapproved.


3. Determine what you want to pay and select a loan option.


4. Submit to the lender an accepted purchase offer contract.


5. Get an appraisal and title commitment.


6. Obtain funding at closing.

• You don’t need to save up a lot of money for the down payment. A conventional mortgage can require as little as a 5 percent down payment, and there are even some first-time buyer programs that require even less.


• Remember, lenders determine what you can borrow, but only you can decide what you can afford.

Chapter 4: Find Your Home

• Careful consultation with your agent is the way to more accurately pinpoint the home you are looking for. The right home will meet all your important needs, and as many of your additional wants as possible.


• The questions you should ask yourself include:

1. What do I want my home to be close to?


2. How much space do I need and why?


3. Which is more critical: location or size?


4. Would I be interested in a fixer-upper?


5. How important is home value appreciation?


6. Is neighborhood stability a priority?


7. Would I be interested in a condo?


8. Would I be interested in new home construction?


9. What features and amenities do I want? Which do I really need?

You’ll learn as you look at homes, it’s wise to refine your priorities along the way.

Chapter 5: Make an Offer

• The three basic components of a purchase offer are price, terms, and contingencies.


• The right price to offer must fairly reflect the true market value of the home you want to buy. Your agent’s market research will guide this decision.


• Terms cover the other financial and timing factors that will be included in the offer.


• Contingencies are clauses that let you out of the deal if the house has a problem that didn’t exist or which you weren’t aware of when you went under contract. They specify any event that will need to take place in order for you to fulfill the contract.

Chapter 6: Perform Due Diligence

• A home owner’s insurance policy protects you against loss or damage to the property itself and against liability in case someone sustains an injury while on your property.


• The property inspection (which we highly recommend you attend) should expose all the secret issues a home might hide so you know exactly what you are getting into before you sign closing papers.


• Your main concern is the possibility of structural damage. This can come from water damage, shifting ground, or poor construction when the house was built.


• Don’t sweat the small stuff. It’s the inspector’s job to mark everything discovered no matter how large or small. Things that are easily fixed can be overlooked.


• If you have a big problem show up in your inspection report, you should bring in a specialist and if the worst-case scenario turns out to be true, you might want to walk away from the purchase.

Chapter 7: Close

• Your preclosing responsibilities include staying in control of your finances, returning all phone calls and paperwork promptly, communicating with your agent at least once a week, and verifying with your lender that all mortgage funding steps are completed.


• Conduct a final walk-through of the home with your agent.


• Confirm with your agent that you have the settlement statement, certified funds, and evidence of insurance lined up prior to closing.

Chapter 8: Protect Your Investment

• After closing your agent can still help you with such things as providing information for your tax returns, finding contractors and repair services,and even tracking your home’s current market value.


• Perform routine maintenance on your home’s systems, depending on their age and condition.


• Watch for signs of leaks, damage, and wear. Fixing small problems early will save you big money later.

About the Book

There is a special category of life's firsts. First kiss. Driving for the first time. Going away to college. Starting your first job. Saying, "I do." Having a child ... All these unique moments bring significance to the story of your life.

Whether you're from Calgary, Cocoa Beach or any place in between, walking into your own home for the first time is just as magical.

Your First Home is the first book in the Keller Williams Realty Guide Series. It’s packed with inspiring stories and the wisdom of thousands of successful first-time home buyers.

The book walks you through the process of home ownership in eight simple steps and provides proven, practical guidance on how to:

• Decide whether buying is right for you


• Hire a great real estate agent


• Determine what you can afford to buy


• Secure the best financing


• Recognize the right home for you


• Craft a winning offer and negotiate with sellers


• Spot serious issues at inspection


• Close on your new home and maintain it

You'll also learn about successful creative financing strategies and ways to overcome less-than-perfect credit.

Download a free copy of the ebook here.

First time home buyers seminar

Tuesday, July 28 — 6:30 to 8:30 pm
Home sales are picking up. Six months ago there was often a single offer for a house on the market, today there are multiple offers and competitive bidding. Home prices are still very low but sales in Dane county are accelerating. Record low interest rates and the first time home buyer tax credit are driving sales locally and nationally.

What does this mean to you?
For Dane County, first time home buyers who haven’t quite taken that plunge yet, your window of opportunity to buy a home at these affordable levels won’t last forever.

Have questions?
If you’re like most first time home buyers in Madison and Dane County, you have many unanswered questions about the home buying process: How much you can afford and how you can negotiate the best deal possible. You’re not going to let a few unanswered questions keep you from owning your own home, are you?

Join us Tuesday July 28th from 6:30 pm – 8:30 pm in Madison to learn:

• How you can receive $8,000 if you buy a home before December 1, 2009
• Financing options for today’s Dane County first time home buyer
• The steps to buying a home in Dane County
• Buying foreclosures and Bank REO houses – getting a great value and avoiding the pitfalls
• Recent price trends
• What not to buy

How can you register?
Registration is free, but space is limited so sign up today to reserve your spot. please go to: www.michelashomes.com/seminars.html or call (608) 770-0482. The program will be held at 3 Point Pl, Madison, WI 53719. For directions: Link to Google Maps.

First-Time Home Buyer Tax Credit

Frequently Asked Questions
The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the tax credit?
   First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
   
   
2. What is the definition of a first-time home buyer?
   The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
   
   For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
   
   
3. How is the amount of the tax credit determined?
   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
   
   
4. Are there any income limits for claiming the tax credit?
   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.
   
   
5. What is modified adjusted gross income?
   Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
   
   
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
   Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
   
   
7. Can you give me an example of how the partial tax credit is determined?
   Just as an example, 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 home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
   
   Here’s another example: assume that an individual home buyer 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.Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
   
   
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
   The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
   
   
9. How do I claim the tax credit? Do I need to complete a form or application?
   Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
   
   
10. What types of homes will qualify for the tax credit?
    Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
    
    
11. I read that the tax credit is "refundable." What does that mean?
    The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
    
    For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
    
    
12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
    Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
    
    
13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
    Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
    
    
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
    
    
15. I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.
    
    
16. Is a tax credit the same as a tax deduction?
    No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
    
    A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
    
    
17. I bought a home in 2008. Do I qualify for this credit?
    No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit.
    
    
18. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
    Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
    
    Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.
    
    
19. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
    Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
    
    
20. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
    Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
    
    
    For more information click here go to the Internal Revenue Service Website.