The proposed $15,000 tax credit looks more and more likely that it is going down to defeat from Congress. This is a drastic blow to what is needed to spur home buying and get home pricing stabilized.

But not all is lost! It looks likely that that a more modest tax credit of $7,500 to $8,000 will be passed. I’m not so sure that this is going to give much steam to the market as there is already a $7,500 tax credit in effect although it is really just a 15 year loan. The new tax credit is designed to be a tax deduction that is designed as a grant to any first time home buyer.

We’ll keep you up to date as more information comes about in stimulus bill.

With the possibility of a greater tax credit on the horizon, there is even more reason to consider jumping into the real estate market today. Check out this latest article from Realty Times and see if it jump starts your interest …http://realtytimes.com/rtpages/20090213_buynow.htm

So, it seems as if the homebuyer stimulus package that we’ve been tracking won’t be quite the Christmas in February that we were hoping for, but it’s still going to be great for first time buyers. Read the latest update here:

An $8000 First-Time Homebuyer Tax Credit has found its way into the economic stimulus package that was approved by Senate and House Representatives. Details of the tax credit within the newly agreed stimulus package have slowly been trickling out of Washington, but it appears that the tax credit won’t be quite as good as once hoped. The thought had been that a $15,000 tax credit to home buyers would be put into the stimulus package, but when the House and Senate came back with different numbers, a compromise had to be reached.

The $8,000 tax credit is just one part of the $789 billion stimulus package that should be on President Obama’s desk very soon to sign. It’s most likely going to help home buyers who purchase a house within the next few months, and early reports from the Associated Press do reveal some details, but not everything about what the tax credit will entail. Some of the details are probably still being fine-tuned as well, so there isn’t a 100% flow of information out of Washington just yet.

The details that have been released thus far are that the $8,000 homebuyer tax credit will apply to any first time homebuyers who purchase homes through July 31st. The start date for the tax credit hasn’t been released as of yet, so it could apply to either January 1st of 2009, or be set on the date that President Obama officially signs the stimulus bill. It looks like President Obama wants to have the bill signed by Monday at the latest, so it may have a February 16th start date for the tax credit, but potential homebuyers who are looking in on this may want to not make any decisions based on the date until it is set in stone.

The fact that this tax credit will only apply to first time homebuyers could serve as a stressor to those who were hoping it would apply to everyone buying a house. Additionally, with the tax credit d$8,000 Homebuyer Credit Lands in Economic Stimulus Package, Replaces $15,000 Creditropping from the original proposal of $15,000 down to $8,000 it also means it is a lot less of a “wind-fall” to people looking to buy a new house in this market. Income restrictions for the credit have not yet been released, but it will be interesting to see exactly what the regulations and stipulations of how this is paid back (or if it is) and exactly who qualifies for it.

Source: Washington Announcement

For questions or more information regarding buying in today’s Real Estate market, contact us today at kjpremier@atproperties.com.

The Economic Stimulus Bill (The American Recovery and Reinvestment Act of 2009, H.R. 1.) has been reconciled by the House and Senate. The details of the legislation have not been finalized but we expect the legislation to include a number of important housing provisions, including the remedies for the housing crisis that NAR prescribed at the annual meeting in Orlando, Florida.

• Homebuyer Tax Credit – a $7500 tax credit that will be available for qualified purchase of a principal residence by a first time homebuyer between January 1, 2009 and September 1, 2009.  The credit does not require repayment. Individuals who purchase in 2009 using financing assistance from state and local mortgage bonds will be permitted to use the credit, as well.
• FHA, Fannie and Freddie Loan Limits – Revised loan limits for FHA, Freddie Mac, and Fannie Mae.  Specifics have not been released but reports indicate that the 2008 limits have been reinstated for 2009 except in those communities where the 2009 limits are higher. Additional increases in individual communities may also be available at the discretion of the HUD Secretary.
• Foreclosure Mitigation & Neighborhood Stabilization – Funding for states and local communities to be used for neighborhood stabilization activities for the redevelopment of abandoned and foreclosed homes are authorized.

These elements of the American Recovery and Reinvestment Act of 2009 are the pillars of the NAR Housing Stimulus Plan presented to the 111^th Congress.  Additionally we continue to work closely with the Department of Treasury and Secretary Timothy Geithner to implement a mortgage buy-down program. NAR also recommended that the Treasury Department expand the Term Asset-Backed Loan Facility (TALF) to include commercial mortgage-backed securities as eligible collateral.  The Treasury has approved this recommendation and this will encourage investment in the commercial real estate market.

The Economic Stimulus Bill (The American Recovery and Reinvestment Act of 2009, H.R. 1)
Additional Housing and Other Provisions of Interest to NAR

• Rural Housing Service – Increased funding for the Rural Housing Service direct and guaranteed loan programs.
• Low Income Housing Grants – Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations.
• Tax Exempt Housing Bonds – Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT).  In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds.
• Energy Efficient Housing – Grants for energy retrofits for federally assisted housing (section 8), funding for Energy Efficiency & Conservation Block Grants to states, and Increases in the residential tax credit through 2010 for certain energy efficient upgrades.
• Transportation –   Spending for upgrades and repairs of road, bridges and transit facilities.  
• Broadband Deployment – Grants to make broadband available in unserved communities

As the leading advocate for homeowners and the real estate industry, the National Association of REALTORS will continue to address the issues facing Americans who are trying to purchase a new home, protect their current home or preserve investment opportunities in residential and commercial properties.

NAR recognizes the efforts of the members of Congress and the Senate who understand that without a housing recovery, an overall economic recovery is impossible.

If the mortgage interest, property tax, and slew of other homeownership tax deductions weren’t enough, Congress has added yet another homeownership incentive: A dollar-for-dollar tax credit of $7,500 when you purchase a home. Want to know if you qualify? Here’s an overview of this newest tax break:

Amount of Credit

Ten percent of the cost of the home, not to exceed $7,500.

Eligible Home Buyers

Home buyers (including spouses) who have not owned a principal residence in the three years prior to the purchase. Those who do not own their principal residence but own a vacation home or other property also qualify for the credit if they are purchasing a principal residence.

Eligible Properties

Any single-family home, town house, condominium, or co-op that will be used as a principal residence.

Income Limits

Taxpayers with adjusted gross incomes of up to $75,000 for singles and $150,000 for couples qualify for the full credit. A partial credit is available to taxpayers who make more than those amounts, not to exceed $95,000 for singles and $170,000 for joint filers.

Qualifying Dates

The credit is available to those who purchase a home between April 9, 2008, and July 1, 2009.

Refundable

The credit will reduce any tax liability owed for the year. If there is excess, the money will be refunded. For example, if you owed $1,000 in taxes and used the $7,500 credit, you could receive a rebate check of $6,500.

Recapture

Two years after claiming the tax credit, a portion must be repaid each year for 15 years, essentially making the tax credit an interest-free loan. For those qualifying for the full $7,500 credit, the payback amount is $500 per year. Those not receiving the full credit pay equally over the 15 years at a rate of 6.67 percent per year. If a home is sold before 15 years, then the remainder of the credit would be repaid from the sale profits. If the home was sold at a loss, the remaining credit payback would be forgiven.

Hi All,

I just wanted to provide you with a little update regarding the first time home buyer tax credit (FTHB) program and how it affects you as a home buyer.  As reported today in the Wall Street Journal, Congress’ stimulus proposal does include a revision of the FTHB tax credit.  Here is how it could benefit you:   

“The proposal would eliminate the repayment requirement for first-time home buyers, and raise the credit to $8,000 from $7,500. However, Congressional aides cautioned that the credit’s size was still subject to negotiation.” (Source WSJ)

So, this is some very good news for you as a home buyer.  If you are still considering purchasing a new home this Spring or Summer, contact your Lender or CPA about the tax credit qualifications. We are seeing listing activity increase within our RE/MAX United office, so fresh houses are coming onto the market for the Spring shopping season!  It is still a Buyer’s market with some very motivated Sellers and Builders!  Take advantage of both of these great opportunities to help you get into your first home.

As it now appears, there will be some kind of tax credit for home buyers who purchase a home.  Under most recent news the tax credit will be up to $8,000 and will apply to first time home buyers.  Final details should be known by early in the week of Feb. 16th.

For buyers, start looking at homes TODAY.  This bill could become law very quickly and many buyers who have been sitting on the sidelines could emerge.  Right now you have very low interest rates, a wide selection of homes to choose from, attractive pricing – and now the $8,000 tax credit that appears to be headed to become law.  Remember, there is pent-up demand and spring is coming soon.

For buyers in Central Indiana, please call me on my direct line:  317-709-2537.  If I can’t get to you right away, be sure to leave a message.  I try to return messages within a few hours.  The Indianapolis area new home builders have a wide variety of home in areas, styles and prices.  I am not restricted to selling homes for one builder.  As a real estate agent, I can work with almost any builder in Central Indiana.  This service is available at no additional cost to the buyer.  There are some quick move-in completed new homes available.  Contact me to get more details.

This website is provided by Dan Rosenberger of the Real Estate Finders Team at Harvest Realty.  Provisions of this proposed tax credit will not become clear until after final legislation is signed into law.  You know there will be restrictions.  To see if any tax credit might apply to your situation, be sure to check with your tax advisor.

A report recently released by CNN Money states that the stimulus bill that passed the House of Representative contained a provision which seeks to amend the terms of “Housing and Recovery Act of 2008″ by, in essence, forgiving the $7,500 tax credit. The tax credit is actually an interest free loan, which is to be paid back over a 15 year period, but if the proposed provision passes the Senate, as well, then the tax credit would no longer be an interest free loan, but an actual tax credit. This would be great news to those who were able to take advantage of the provision.

One big question that I have is how this proposed provision will be affected by the new proposed provision, which will possibly increase the $7,500 limit to $15,000. If the new legislation offers $15,000 that does not need to be paid back, then I see a pretty strong incentive to purchase a home.

As the story continues to develop, I will be sure to update the blog. Be sure to check my previous entries on this topic by clicking on the Home Buyer Tax Credit Category on the side panel of the blog.

Joseph Griffin

In a report just released by FoxNews.com, the GOP has added a provision to the current economic stimulus plan that would possibly increase the homebuyer tax credit up to $15,000. The proposal would also extend the provision to non-first time home buyers, according to the article. If they amend the previous limit in this manner, then it is likely that they will also extend qualifying time period beyond July 1, 2009.

At this point, however, this is only a possibility. We will know in a few days whether or not it passes and they amend the current provision by raising the limit to $15,000.

One of the big questions to be answered is whether or not those who have already purchased a home and received the $7,500 tax credit will be able to amend their returns and receive the additional $7,500 credit that is now being proposed. If not, then I think of lot of people are going to be fairly upset. There is much to watch here. Check back for updates and please leave any questions as a comment.

For more information about the tax credit click here to see my other posts on this developing topic.

Joseph Griffin

Today, I was re-reading the applicable parts of HR 3221, which is the Housing and Economic Recovery Act of 2008, and I saw a section that should really be emphasized, which is as follows:

‘‘(g) ELECTION TO TREAT PURCHASE IN PRIOR YEAR.—In the
case of a purchase of a principal residence after December 31,
2008, and before July 1, 2009, a taxpayer may elect to treat such
purchase as made on December 31, 2008, for purposes of this
section (other than subsection (c).”

This section is stating that if you make a qualifying purchase between January 1, 2009 and July 1, 2009, then the IRS will consider that you purchased the home on December 31, 2008. This means that if you purchase a home between the 2009 dates above, you can go back amend your 2008 tax return and receive the tax credit. You do not have to wait until time to file your 2009 tax return. I hope that this helps.

Joseph Griffin

My other related posts are:

Way’s to Use $7,500 Tax Credit as a Downpayment

How the Tax Credit Applies to New Construction

Quick Faxts about the $7,500 Homebuyer Tax Credit

IRS Form for Claiming the $7,500 Homebuyer Tax Credit

A few months ago, I did a post on the $7,500 homebuyer tax credit, which is part of the Housing & Economic Recovery Act of 2008 or H.R. 3221.  You can see those posts here:

 Way’s to Use $7,500 Tax Credit as a Downpayment

How the Tax Credit Applies to New Construction
 
Quick Faxts about the $7,500 Homebuyer Tax Credit

Now that it is tax time, I’ve received a few questions regarding how to file for the tax credit.  So attached to this post is the appropriate IRS Form and instructions for filing for the tax credit.  It is IRS Form 5405 Homebuyer Tax Credit.  The form includes instructions for how to complete it for those of you who file your taxes yourself. 

Even if you have already filed your taxes, you can go back and amend your tax return if you were eligible for the credit, but did not file for it.  I’ve had a couple of people e-mail me who asked about this and were able to amend their return without any problem. 

I’ve also received a question about someone who is eligible for the return, but their spouse has an IRS lien.  If the lien is against one spouse, then you may be able to file separately.  But if you are able to do this, you will only qualify for $3,750 of half of the tax credit.  This was done to make certain that spouses filing separately wouldn’t receive $15,000 by filing for the full $7,500 rebate.  If you have other specific questions, please look at my previous posts first.  If what you are looking for isn’t there, please post a comment, and I’ll be sure to answer it.

Joseph Griffin

First time homebuyers (considered buyers who have not owned a home for the past three years) may be eligible for a tax credit up to $7,500 when they purchase a home.   So you have very low interest rates, plentiful supply of homes to choose from, and attractive pricing.  Plus you can get a $7,500 tax credit on the following years taxes.  (Make sure you check with your accountant or tax advisor to see if this might apply to your situation.)

One of the disadvantages of the “credit” as it was originally proposed was that the amount needed to be re-paid with no interest over 15 years.  There might or might not be changes in that.  We should know something more definite as the economic stimulus legislation progresses.

The important thing here is to not be sitting on the sidelines when there are opportunities available.  I expect that some of the best opportunities will go to those who are ready to move forward.  Indianapolis real estate buyers, take note.

UPDATE FEB. 6, 2009.  It appears that there are upcoming changes.  First under current proposals, there will be a new $15,000 (or 10% of purchase price up to $150,00.)  Second, the tax credit would really be a tax credit and it would not have to be repaid as under the current tax credit.  The new credit would replace the old $7500 repayable credit.  These are proposals at this point and not final legisation.  Keep alert to the news about the stimulus package as it progresses through Congress.

UPDATE FEB. 12, 2009  It appears that as difference betweenHouse and Senate versions were ironed out, the $15,000 tax credit was removed.  It now appears that there will be a $8,000 tax credit for first time home buyers to replace the old $7,500 tax credit.

UPDATE FEB. 15, 2009  The new $8,000 tax credit will apply on homes closing 1/1/09 to 10/30/09.  On homes that closed in 2008 that were eligible before for the $7500 repayable tax credit, that is essentially unchanged.  There is a comparison matrix on realtor.org.  Click on the Stimulus update and then on the first time homebuyer credit.  From there you should be able to get the comparison matrix.  I will update this site soon with that information.  The bill is expected to be signed into law early in the week by President Obama.

I was recently reading the federal housing tax credit web site and thought that it might be interesting for you all to know about the tax credit availiable for first time home buyers.

Check out their website:  Federal Housing Tax Credit  

“The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after After 9, 2008 and before July 1, 2009. The following questions and answers provide basic information about the tax credit. If you have more specific quetions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.”

1. Who is eligible to claim the $7,500 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 April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.
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. 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 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. No other applications or forms are required. No pre-approval is necessary; however, prospective home buyers will want to be sure they qualify for the credit under the income limits and first-time home buyer tests.
4. What types of homes will qualify for the tax credit?
   Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.
5. Instead of buying a new home from a home builder, I have 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 April 9, 2008 and before July 1, 2009.In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
6. 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.
7. 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 $7,500 are available for some taxpayers whose MAGI exceeds the phaseout limits. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income of more than $95,000 and for married taxpayers filing joint returns with an AGI of more than $170,000.
8. 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 $7,500 by 0.5. The result is $3,750.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 $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625.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.
9. Does the credit amount differ based on tax filing status?
   No. The credit is in general equal to $7,500 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer. However, if a household files their taxes as “married filing separately” (in effect, filing two returns), then the credit of $7,500 is claimed as a $3,750 credit on each of the two returns.
10. Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?
    In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $7,500. For most first-time home buyers, this means the credit will equal $7,500. For home buyers purchasing a home priced less than $75,000, the credit will equal 10% of the purchase price.
11. I heard 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 taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owed).
12. What is the difference between a tax credit and a tax deduction?
    A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 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 $7,500 in income taxes. If the taxpayer receives a $7,500 deduction, the taxpayer’s tax liability would be reduced by $1,125 (15 percent of $7,500), or lowered from $7,500 to $6,375.
13. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    No. The tax credit cannot be combined with the MRB home buyer program.
14. I live in the District of Columbia. Can I claim both the DC first-time home buyer credit and this new credit?
    No. You can claim only one.
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. Does the credit have to be paid back to the government? If so, what are the payback provisions?
    Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.
17. Why must the money be repaid?
    Congress’s intent was to provide as large a financial resource as possible for home buyers in the year that they purchase a home. In addition to helping first-time home buyers, this will maximize the stimulus for the housing market and the economy, will help stabilize home prices, and will increase home sales. The repayment requirement reduces the effect on the Federal Treasury and assumes that home buyers will benefit from stabilized and, eventually, increasing future housing prices.
18. Because the money must be repaid, isn’t the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?
    Yes. Because the tax credit must be repaid, it operates like a zero-interest loan. Assuming an interest rate of 7%, that means the home owner saves up to $4,200 in interest payments over the 15-year repayment period. Compared to $7,500 financed through a 30-year mortgage with a 7% interest rate, the home buyer tax credit saves home buyers over $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.
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.
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.
21. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2008 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 future home 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.

**Note: This information is directly from the Federal Housing Tax Credit Website**

Don’t forget to check out my website:  Barbara Nelson’s Website

Have a wonderful week,

Barbara Nelson
Direct: 503-803-0562
Office: 503-270-5604
Fax: 503-270-5605

I’ve had quite a few first-time home buyers ask me about this 10% of a purchase price loan (upto $7500). It sounds great! If you need a 15 year loan.
Because really, that’s just what it is. This is not a gift money, it’s money you do have to pay back. But what’s great about this loan is that it is interest free and you’ll have 15 years to pay it back. On the surface it may seem like a bad deal but really that’s probably because you were expecting NO OBLIGATION MONEY. If you were looking for a new 0% interest credit card this would beat anyone you could find.
So consider this tax credit only if you need a loan and you are COMMITTED to paying it off by 2024…. COMMITTED.

Another article on this loan–I mean tax credit: http://www.washingtonpost.com/wp-dyn/content/article/2008/07/30/AR2008073003013.html?wpisrc=newsletter

I’ve been asked on several occasion “what’s this tax credit all about”.  Simply put, the tax credit is a loan from the government to first-time home buyers.

President Bush signed a major housing bill into law on July 30, 2008.  As part of the housing bill, Congress created this temporary tax credit to provide an incentive to first-time home buyers.

• Who is Eligible?
  The credit is available to first-time home buyers only.  A first-time home buyer is defined as an individual who has not had an ownership interest in a principal residence in the previous 3 years.
  
• Is There a Deadline?
  Yes.  The credit is available for homes purchased on or after April 9, 2008 and before
  July 1, 2009.
  
• Is There an Income Requirement?
  Yes.  Single taxpayers with incomes up to $75,000 and people filing joint returns with incomes up to $150,000 qualify for the full tax credit.
  
• What is a Tax Credit?
  The tax credit works like an interest-free loan and must be repaid over a 15-year period.
  
• Does the Price of the Home Matter?
  Yes it does.  The credit is for 10 percent of the cost of the home, up to a maximum credit of $7500.

There are numerous resources available for additional, detailed information about the tax credit.  click on either of these sites below that I found to have the most in-depth information:

• IRS Tax Credit Information
• Tax Credit Info from Realtor.com

Bob

bob@bentleyrealtygroup.net
www.bentleyrealtygroup.net

Are you having trouble wading through all the details of the first time home buyer credit?  Most people are aware that it ’s not a simple credit–you have to pay it back over a period of time, which means that it really boils down to an interest free loan.  However, you also need to know what the definition of “first-time home buyer” is, and that there are income restrictions, and a number of other details that you need to be aware of.  Talk to your tax professional for the full story, or if you have specific questions about how the tax credit might work for you, but in the meantime, check out this article  by Mary Umberger for the basics in plain English.  You can also find more information at the Federal Housing Tax Credit website.

Originally published November 2008

The National Association of Realtors has a Plan!

As important issues regarding home ownership, private property rights, and the housing sector come before Congress, the National Association of Realtors takes an active role in helping to pass legislation that will help homeowners. After researching each issue carefully, NAR issues a “Call to Action” to each member of its nationwide organization. I received one today, outlining the 4 point plan, and urging each Realtor member to submit a wonderfully and carefully drafted letter to each member of Congress. 

NAR is urging Congress to include the following four provisions in any future legislation:

• Make the $7500 tax credit available to all purchasers and eliminate the repayment requirement. 
• Make the 2008 FHA, Fannie Mae and Freddie Mac loan limits permanent. 
• Get the Emergency Treasury bank relief program back on track.
• Permanently bar banks and banking conglomerates from engaging in real estate brokerage.  

Today’s letter, which I will send as soon as I post this blog entry, looks like this:

Reviving the real estate market must be the focus of any future stimulus bill

Dear [decision maker name automatically inserted here],

As a constituent and a Realtor, I ask that Congress focus any future stimulus package on reinvigorating housing markets. The current crisis is the result of problems in the nation’s housing markets. Efforts to boost the economy must calm jittery real estate markets.

Earlier, the National Association of Realtors (NAR) proposed a 4-Point Housing Stimulus Plan that should be part of any new stimulus package. NAR’s plan would:

*Make the $7500 first-time homebuyer tax credit available to all buyers and eliminate repayment requirements. The credit’s limited availability and repayment requirement severely limit the credit’s use and effectiveness.

*Make the 2008 FHA, Fannie Mae and Freddie Mac loan limits permanent. New rules for 2009 will reduce them. Now is not the time to limit mortgage affordability.

*Get the Treasury relief program back on track and target more funds to mortgage relief. Create a federal mortgage interest buy-down program to make below-market rates available and stabilize home prices.

*Permanently bar banks from engaging in real estate brokerage and management. The banks have proven they have enough to do to simply manage the loan process. Banks should not manage home sales and purchases.

Housing has always lifted our economy out of past economic downturns. It’s imperative now to foster a housing recovery, so that the economy can recover. Thank you for your hard work.

Sincerely,

Cheryl Knowlton

What is this $7500 credit that I have been hearing about available to first time home buyers?  We get this question a lot so we thought that we would answer a few of your questions that you might have about this program.

Who can take advantage of this tax credit?  Any couple or individual buying a home for the first time or any couple or individual who has not owned a home in the last 3 years.

Do I have to pay the money back?  Of course!  Did you think the government would just GIVE you money without asking for it back?  You have to pay back the $7500 over 15 years- $500 a year.  If you sell your home- the full amount is due back to the government.  However- if you loose your equity on your home- the credit is forgiven.

Think of this tax credit as an interest free loan from the government.  We would recommend that you take the “loan” and invest it somewhere and then pay off the $500 a year.

How and when do I get the money?  When you file your income taxes for the year that you purchased the home.  You will get the money back as a refund when you file your federal taxes.

We recommend that you speak to a CPA to get additional information about this credit.

I wish I could have bought my first home a year ago!  Not only have interest rates and prices come down significantly- there are many programs that the federal and local government have put into place in the last year to help first time home buyers buy their first home.  And we really don’t know how long some of these programs will be in place so we suggest you take advantage of them while their are still available.

This is a great opportunity for some help with a down payment for any buyer who has not owned a home in the past 3 years but it’s been a bit confusing since it is so different than other down payment assistance programs.

First, let me clarify: Most down payment assistance programs are obtained through your mortgage consultant, this one is not. It is obtained through the filing of your tax returns, usually after you purchase the home so in most cases, the home would be purchased with your own (or borrowed) down payment, then the credit would be refunded in your 2008 income tax return.

So here’s how it works: The credit operates much like an interest-free loan, because it must be repaid over a 15-year period. So, for example, an eligible taxpayer who buys a home today and properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on his or her 2010 return.

Note: These funds must be used on a purchase of a home no later than July 1, 2009. This means you would need to find a home and close on it by this date.

FIRST-TIME HOMEOWNER TAX CREDIT

It is a good time to re-familiarize people with the $7500 tax “credit” for first-time
homebuyers that all of us real-estate professionals will be asked about this spring.

Here are the highlights:

1. The $7500 tax credit is applicable to your 2008 or 2009 tax year.

2. It is for 1st-time homebuyers (people who have not owned a primary residence in three or more years)

3. The full benefit is for available for single taxpayers with incomes up to $75,000, and married couples with incomes up to $150,000

 4. The $7500 is repaid to the federal government, interest-free, in $500 increments over 15 years. These payments are part of your future tax liability.

5. The credit is for home purchased between April 9th, 2008 and July 1st, 2009

For more info, call Eric Peltier or visit: www.FederalHousingTaxCredit.com

SOURCE:

Eric S. Peltier
Dovetail Lending LLC
ericpeltier@dovetaillending.com 
Boulder, CO 80302
Phone: 303-449-0343
Mobile : 303-579-6386
Colorado License #MB100008090
NAMB Member

Is your lender Carbon Neutral, Zero Waste, Wind Powered, Locally Owned, and providing Paperless Originations?  Could Your Mortgage Be Organic?   TM

JEN’S NOTE:

This Tax Credit is essentially an INTEREST FREE loan from the government. If you are currently strapped for cash or your tax situation warrants it, this may be a good option for you.

However, if paying an additional $500 over the next FIFTEEN YEARS is going to be a struggle or annoy you severely, you may want to forego this government loan. 

Another spin on this program.

Lake Mary First Time Home Buyers… perk up. We all know what inflation is and the ugliness that can go with it. Most of us know that deflation is the opposite of inflation…. but don;t know much more than that.

In fact, business TV and newspapers have inflated deflation [sorry for the play on words... but I like doin' that] as a hot topic this week and, since Monday, Google has tracked 13,000 mentions of it. Make this 13001.

Deflation is a recurring cycle in which the prices of goods and services fall. Suh-weet… falling prices that is so cool, right? Well, um, not really. Why? Human nature.

When prices are declining across many industries at the same time, IT CAN SHUT DOWN THE ECONOMY!

If you think about it…

Find out the ugly truth of deflation by finishing the blog post here:

Talk of Deflation – What Lake Mary First Time Home Buyers Need?

(Image courtesy: The Wall Street Journal)

Chris Brown All Around Good Guy Trinity Mortgage 153 Parliament Loop #1001 Lake Mary, Florida, 32746	Work: 407 377 0500 x 210 Chris@OrlMtgPro.com www.OrlandoMortgagePro.com
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