Homebuyer Tax Credit Update!
On November 6, 2009, President Obama signed a bill to extend the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time.
TAX CREDIT OVERVIEW
Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.
How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is Eligible fort FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
How Much are Current Home Owners Eligible to Receive?
The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.
Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.
According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.
Are There Other Restrictions to Taking the FTHB Credit?
Yes. According to the IRS, if any of the following describe a homebuyer's situation, a credit would not be due:
Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?
Yes, provided that the child meets the other requirements for the tax credit.
Senators agree to extend homebuyer tax credit
By STEPHEN OHLEMACHER (AP) - 1 hour ago
WASHINGTON - Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.
The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. The Commerce Department said Wednesday that new home sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.
The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.
Senators were still negotiating the expansion of a separate tax credit that lets money-losing businesses get refunds for taxes paid in previous years, providing them with an immediate source of cash.
Senators in both political parties were hoping to add both tax provisions to a bill that would give people running out of unemployment insurance benefits up to 20 more weeks of federal aid. The Senate could vote on the overall bill as early as Thursday, but lawmakers were still haggling over several unrelated amendments Wednesday evening.
Popular bills like the one to extend unemployment benefits often attract amendments that would have a difficult time passing on their own.
Republicans were demanding that they be given a chance to offer amendments to restrict federal aid to the beleaguered community activist group ACORN and on requiring that people receiving unemployment insurance be processed through E-Verify, an Internet-based system that employers use to check on the immigration status of new hires.
Majority Democrats have refused to add the amendments.
If the Senate passes the bill, it would go to the House, which passed a similar bill extending unemployment benefits last month. House leaders have also said they support extending the tax credit for homebuyers.
Sen. Chris Dodd, D-Conn., has been negotiating for several weeks with Sen. Johnny Isakson, R-Ga., to craft an extended tax credit for homebuyers that would pass the Senate.
Lawmakers didn't release a cost estimate for extending the tax credit, though similar proposals were projected to cost about $10 billion.
Industry representatives said uncertainty about the tax credit is hurting new home sales. September's decline was the first since March.
It takes 45 days to 60 days to close on a house, making it unlikely a sale made today would be consummated by the end of November, said Lucien Salvant, spokesman for the National Association of Realtors.
"Buyers right now have an incentive to hold off, not knowing whether the credit will be extended," Salvant said.
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.
The tax credit for money-losing businesses is a favorite among Republican lawmakers. Businesses could get tax refunds by using losses from 2008 and 2009 to offset taxable profits made in the previous five years. Under current law, they can only offset profits from the previous two years.
The provision would help a variety of industries, including retailers, manufacturers and home builders, though it's expensive.
"It's clearly a way to put cash in the hands of some major economic players," said Clint Stretch, a tax policy expert at Deloitte Tax.
A similar proposal that was ultimately dropped from the economic stimulus package enacted in February would have cost nearly $20 billion over 10 years. Lawmakers are working to reduce the price tag.
Because people are so strapped for cash, this is a good way to get refunds when businesses need them for operating expenses, said Rachelle Bernstein, vice president and tax counsel for the National Retail Federation.
Congratulations to Mr. and Mrs. Corbett on their new home purchase. I hope you find this home to be perfect for years to come.
Opened escrow on 9/23/09 and funded 10/22/09... that is 23days using FHA financing on a short sale, way to go Team!
Ryan Morrow
Loan Officer
Frost Mortgage
(661) 992-2216
Congratulations to Mr. Rugira on your new home... after 1yr of looking for the right place to move your family into.... numerous offers... you now have a home of your own. Congratulations to you and your family. It was a pleasure serving you.
Ryan Morrow
Loan Officer
Frost Mortgage
(661) 992-2216
DU 8.0 changes are headed our way. One of the major changes will be to the DTI limits allowed on AUS desicion loans. 45% will be the standard with DU allowing up to 50% with strong compensating factors.
If you are looking to buy this year you need to get with your loan officer very soon to make sure you are properly structured. Remember if you own a home already and want to buy a new primary you must qualify with both mortgage payments unless you currently have 25% + equity in your current home. With the new rules you will need to qualify for both mortgage payments and incude all other liabilities on your credit report and will not be able to exceed 45% of your gross monthly income.
Dont delay, get qualifed to purchase and start looking today. From the time most buyers start looking until they finally have an accepted offer and are in escrow it is taking an average of 45-60days. So plan accordinly.
You can apply online @ www.MORROWMORTGAGE.com
Follow me on Facebook @ http://www.facebook.com/pages/Lancaster-CA/Ryan-Morrow-Loan-Officer-With-Frost-Mortgage-Lending-Group/114957488747
I work as a Loan Officer for a large Direct Lender. We offer in house financing solutions for First time buyer, investors and everyone in between. Our aggressive rates and underwriting done on site gi
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
Powered by the ActiveRain Real Estate Network
© 2009 ActiveRain Corp. All Rights Reserved
