Federal Home Buyer Tax Credits End

To be eligible for the federal tax credits of  $8,000 for those who have not owned in the past 3 years or $6,500 for those who have owned for 5 years, a purchase contract must be in place by April 30 (except for those serving in the armed forces abroad who have additional time).  In Madison and Dane County, Wisconsin, the inventory most appealing to first time buyers is picked over, leaving the less attractive and over-priced properties behind.  Real estate agents have been working frantically to assist buyers in meeting the deadlines.  Now the crunch moves on the certified building inspectors.

The local Dane Count housing market will move into the next phase.  Life circumstances and economics will lead to new inventory coming on the market.  Confounding me as well as the experts, interest rates have risen only gradually after the Federal Reserve Board ended the purchase of Mortgage Backed Securities, holding interest rates artificially low.  Interest rates for those with excellent credit are expected to reach only 6% for a 30 year fixed loan by the end of 2010 and 7% in 2011, still low by historic standards.  Buyers who stood on the sidelines will find new opportunities with fewer competing buyers, new inventory, bargains in hundreds of distressed properties, and sellers who will be compelled to reduce their price.  Sellers will be able to sell to serious buyers, often those with considerable cash to put down and less dependent on ever changing federal loan policies and incentives.

Tax Tips for Homeowners Looking Ahead to 2010 Returns

By: Mike DeSenne

Published: February 22, 2010

By HouseLogic of the National Association of Realtors

From energy tax credits to vacation home deductions, check out these tax tips for homeowners looking ahead to 2010 returns.

If you believe your real estate assessment is too high, you can always appeal it and possibly save on your property tax bill. Image: Tetra Images/Getty Images

Tax planning for homeowners should start well in advance of the April 15 filing deadline each year. If you delay until the last minute, it might be too late to maximize tax credits and tax deductions. These tax tips for homeowners looking ahead to 2010 returns explain some of the things you can do now that’ll pay off later on your 1040.

Take a day to formulate a tax plan for the year. Depending on your circumstances, you might want to take advantage of energy tax credits or max out your vacation home deductions. The “What’s New in 2010” section of IRS Publication 17 offers a sneak peek at tax changes that might affect homeowners.

Claim remaining energy tax credits

It’s time to get cracking if you didn’t exhaust your full allotment of residential energy tax credits during 2009. Although tax credits for big projects like residential wind turbines and solar energy systems have no upper limit and are good through 2016, energy tax credits capped at $1,500 expire at the end of 2010. Eligible capped projects include new windows and doors, insulation, roofing, water heaters, HVAC, and biomass stoves.

Here’s how it works with capped federal credits: You can earn energy tax credits worth 30% of the cost of qualifying improvements, but the total tax credits can’t exceed $1,500 combined for 2009 and 2010. So if you only took, say, $700 worth of capped energy credits on your 2009 tax return, you’re still due for another $800 in credits in 2010. Some projects include the cost of installation—a furnace, for example—while others, such as insulation, are limited to the cost of materials.

Max out tax benefits of a vacation home

Use a vacation home wisely, and it’ll provide a break from taxes as well as the hustle and bustle of everyday life. The rules on tax deductions for vacation homes can get a bit tricky, but understanding and adhering to them can yield many happy tax returns.

If your vacation home is truly a vacation home meant for your personal enjoyment, as opposed to a rental-only income property, you can usually deduct mortgage interest and real estate taxes, just as you would on your main home. You can even rent out the home for up to 14 days during the year without getting taxed on the rental income. Not bad.

Now, let’s say you want to rent out your vacation home for more than 14 days in 2010, but also use it yourself from time to time. To maximize the tax benefits, you need to keep tabs on how many days you use your vacation home. By restricting your annual personal use to fewer than 15 days (or 10% of total rental days, whichever is greater), you can treat your vacation home as a rental-only income property for tax purposes.

Why is that a big deal? In addition to mortgage interest and real estate taxes, rental-only income properties are eligible for a slew of other tax deductions for everything from utilities and condo fees to housecleaning and repairs. Deductions are limited once personal use exceeds 14 days (or 10% of total rental days), so get out your calendar now to strategically plot your vacations.

Take advantage of tax breaks for the military

In salute to members of the armed forces serving overseas who want to purchase a home, the IRS is extending a lucrative tax perk for military personnel. If you spent at least 90 days abroad performing qualified duty between Jan. 1, 2009, and April 30, 2010, you have an extra year to earn a homebuyer tax credit. In addition to uniformed service members, workers in the Foreign Service and in the intelligence community are eligible.

Thanks to this extension of the homebuyer tax credit, qualifying military personnel have until April 30, 2011, to sign a contract on a new home. The deal must close before July 1, 2011. Just like non-military buyers, first-time homebuyers can earn a tax credit worth up to $8,000, and longtime homeowners can earn a credit of up to $6,500. The same income restrictions and $800,000 cap on home prices apply.

Military personnel can also get a break if official duty calls and they’re forced to move for an extended period. Normally, the homebuyer tax credit needs to be repaid if you sell your home within three years, but this requirement is waived for uniformed service members, Foreign Service workers, and intelligence community personnel. The new extended duty posting doesn’t need to be overseas, but it must be at least 50 miles from your principal residence.

Challenge your real estate assessment

You can’t do much about the rate at which your home is taxed, but you can try to do something about how your home is valued for taxation purposes in 2010. The process varies depending where you live, but in general local governments conduct a periodic real estate assessment to determine how much your home is worth. That real estate assessment figure is used to calculate your property tax bill.

You can usually appeal your real estate assessment if you think it’s too high. Contact your local assessor’s office to find out the procedure, and be prepared to do some research. There’s often no charge to request a review of your assessment.

Look for errors. You probably received an assessment letter in the mail, and many local governments provide the information online as well. Make sure the number of bedrooms and bathrooms is accurate, and the lot size is correct. Also check the assessed value of comparable homes in your area. If they’re being assessed for less than your home, you might have a case for relief.

Even if your assessment is accurate and comparable homes are being taxed at the same rate, there might be another route to tax savings. Ask your assessor’s office about available property tax exemptions. Local governments often give breaks to seniors, veterans, and the disabled, among others.

This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

Mike DeSenne is Online Managing Editor for taxes, finances, and insurance at HouseLogic.com, and the former Executive Editor of SmartMoney.com. He likes to do his taxes by hand, much to the dismay of his accountant.

“Visit Houselogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.”

High Home Prices Create Continued Bubble

As Alyssa Katz writes:

“With home prices continuing to plummet every month, it may be hard to believe. But it’s now officially government policy to keep those home values as high as possible. And Neil Barofsky, the Special Inspector General of the Troubled Asset Relief Program, doesn’t like it one bit.”

Further support for Katz’s argument that we are still in a housing bubble in much of the country, is that in many areas, the price of homes is still at historic highs proportionate to rents.  With the Federal Reserve Board ending the purchase of mortgage backed securities March 31, 2010, expect interest rates to rise, and real estate prices to fall, which may be a good thing, in the long run. It will make home ownership more realistically affordable.

A word of caution.  Those waiting to sell when prices are higher may have a long long wait.  Despite the deep snow, we are in the midst of the spring market, typically the busiest season of the real estate year.

Read the rest of Katz’s fascinating blog.

Rush to Take Advantage of Low Mortgage Rates &

Looking at the national real estate market, Chris McLaughlin reported today that “borrowers are rushing to take advantage of low borrowing costs and other incentives while they last. The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending January 15, 2010.  The Market Composite Index increased 9.1 percent on a seasonally adjusted basis from one week earlier, and decreased 52.3 percent compared with the same week one year earlier.  The Refinance Index increased 10.7 percent from the previous week and the seasonally adjusted Purchase Index increased 4.4 percent from one week earlier.  The unadjusted Purchase Index increased 9.8 compared with the previous week and was 19.1 percent lower than the same week one year ago.”

“The refinance share of mortgage activity increased to 71.7 percent of total applications from 71.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4.1 percent from 4.0 percent of total applications from the previous week. Average 30-year mortgage rates dropped to 5 percent last week, and it’s still before the deadline to take advantage of the government’s extended and expanded federal tax credit.  Despite these lures to buyers, the fallout from unemployment, underemployment and the ongoing sale of foreclosure properties continue to keep many potential buyers out of the market, and [nationally] housing is unlikely to gain much traction until these barriers start to fall.”

Home Buyer Tax Credit Expanded & Extended Briefly

The first time home buyers tax credit has been expanded and extended.  Those who have not owned a home (including condo or co-op unit) in the past three years are eligible for the $8,000 tax credit and those who have lived in their current home for five years and are purchasing a new home are eligible for a $6,500 credit.  In both cases, a purchase contract must be in place by April 30, 2010 and the purchase closed by June 30, 2010.  Provisions take effect immediately and affect sales in process. 

There is a lot of fine print, some of which is provided below.  For details on how it may apply to you, please consult a professional tax specialist.

The following information has been provided by the National Association of Realtors and Keller Williams Realty.

Homebuyers $8,000 Tax Credit Extended through April 30, 2010

On November 6, 2009, President Obama signed into law an extension of the $8,000 first-time homebuyers tax credit until April 30, 2010. Binding contracts for the purchase of a principal residence signed by April 30 must close by June 30 to qualify in order for the first-time homebuyer to qualify for the credit. For qualifying purchases in 2010, taxpayers will have the option of claiming the credit on either their 2009 or 2010 return. 

The new law added several new provisions that apply to persons purchasing homes on or after November 7, 2009:

• Homebuyers with higher incomes can now qualify for the credit for homes purchased after November 6, 2009. Income limits have been increased to $125,000 for individuals and $225,000 for couples filing jointly. These income limits were formerly $75,000 and $150,000, respectively. The credit phases out for individual taxpayers with a modified adjusted gross income between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers.
• The new law adds a $6,500 credit for long-time homeowners who want to trade up, that is, current home owners who have lived in their home for five of the past eight years and who buy a replacement principal residence by April 30, 2010.
• Qualifying home purchase prices must not exceed $800,000.
• The extended tax credit for first-time home buyers remains at $8,000 and requires that the buyer have not owned a home in the past three years, as before.
• Purchasers claiming the credit will need to attach documentation of the transaction to their tax returns in order to help combat the tax credit fraud that has been experienced by the IRS to date.

National Association of REALTORS® Government Affairs Division 500 New Jersey Avenue, NW, Washington DC, 20001

Here are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit

Question: Existing homeowner credit: Must the new house cost more than the old house?

Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a first time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered,

however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?

Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill.  The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phase-out range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?

Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?

Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he did since 3 years doesn’t impact eligibility.

Question: I am an eligible first-time homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?

Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.

Home Buyer Tax Credit Extended and Expanded

	Current	New
Effective Date	·        January 1, 2009	·        November 7, 2009
Deadline	·        Close on or before  November 30, 2009	·       Contract signed before May 1, 2010, must close before July 1, 2010·       Members of the uniformed services, foreign services, and intelligence employees who served an extended service of 90 days will have until April 30, 2011 and June 30, 2011.
Amount	·        First-Timers: maximum of $8,000  or 10% of sales price·        Prior Owners: $0	·        First-Timers: Unchanged·        Prior Owners: $6,500 if lived in prior home for at least 5 years of past 8 years
Income Limit	·        Individual: $75,000·        Couple: $150,000	·        Individual: $125,000·        Couple: $225,000
Other   Restrictions	·       Home must be primary residence for at least 3 years. If home is sold or buyer moves before 3 years, must re-pay full amount of credit.	·       Buyer must be at least 18 years old and not classified as a dependent for tax purposes·        Home must cost less than $800,000·       New Home must be primary residence for at least 3 years following purchase. If home is sold or buyer moves, before 3 years, must re-pay full amount of credit. Exception for military, foreign services, or intelligence with extended 90 days service overseas.
How to claim	·       If purchased in 2009, by amending 2009 tax return or claiming on 2010 tax return	·       If purchased in 2010, by amending 2010 tax return or claiming on 2011 tax return

Homebuyer Tax Credit to be Extended

Not only are home prices down, the federal government is about to throw in $6,500 to make a purchase an even better deal.

The intent is to stimulate sales of higher priced homes as well as entry level properties.  It also could help sellers in getting a slightly higher price for their homes.  However, further extensions of this tax credit are not likely, so those delaying a home purchase may lose out on a great source of financial assistance.

STEPHEN OHLEMACHER (AP) reports:

WASHINGTON — 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. With the program scheduled to expire at the end of November, the Senate voted Wednesday, November 4 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, November 6.

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 (including condo or co-op unit) 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.

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. The measure passed the Senate by a 98-0 vote.

Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.

The tax break would help industries suffering losses in 2008 or 2009, including retailers, homebuilders and newspapers. The new tax break would be available to companies of any size, providing a quick source of cash.

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.

Time Running Out

Time is running out on the $8,000 First Time Home-buyer Tax Credit. (First time meaning have not owned a house, condo or co-op unit in past three years; home-buyer meaning purchaser of a primary residence–house, condo or co-op unit.) To qualify for the very nice tax credit, the purchase must close no later than November 30, 2009. Given all the new requirements of the federal government and lenders, no less than 30 days and generally 45 days is essential between the time there is a purchase contract between buyer and seller and the closing. Thus buyers must have have an accepted offer on a property by October 15. Furthermore, expect a crunch as many buyers, having delayed until the next to last moment, all try to close by November 15.

There has been some talk in Congress of extending and expanding the credit. So far it is only talk; few have signed on to any bill. Expanding the “Cash for Clunkers” by $2 billion was one thing. Asking for many billions more for real estate is another. Especially following the announcement that the federal budget deficit will be trillions of dollars more than previous estimates.

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Tax-Credit Draws First-time Home-buyers into Market

In Uncategorized on June 12, 2009 at 2:18 am

The first-time home-buyer tax credit of $8,000 is causing a lot of interest in the purchase of low and moderately priced homes.  “First-time home-buyer” means a person who has not owned a home in the past 3 years.  “Home” includes not only houses but condos and co-op units.  To be eligible for the credit, a buyer must close on the property by November 30, 2009.  Realistically, in most cases, from the time a buyer obtains a binding contract to purchase a property to closing, at least 35 days are required.  So time is getting short and there is no guarantee that Congress and the President will continue the program.

With property prices having rolled back, there are some charming vintage and historic properties within the affordable range of many first-time home-buyers.

For details on the tax credit Click Here.

To search all of South Central Wisconsin for homes, Click Here.