Rob Kelly

I work with alot of first time home buyers and have had many questions regarding the $8000 tax credit. Here's a nice piece about First Time Home Buyers Tax Credit.

First-Time Home Buyer Tax Credit
Answers to the most commonly asked questions
by Land Title Guarantee Company
May 2009

In its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation that provides a tax credit of up to $8,000 for first-time home buyers. The American Recovery and Reinvestment Act of 2009, signed into law on February 17, 2009, is a stimulus package that makes a non-repayable tax credit of up to $8,000 to qualified first-time home buyers purchasing a principal residence on or after January 1, 2009, and before December 1, 2009.

• The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

• The tax credit does not have to be repaid.

• The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.

• The credit is available for homes purchased on or after January 1, 2009, and before December 1, 2009.

• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

The following information has been edited for length and is used with permission from the National Association of Home Builders' website, www.FederalHousingTaxCredit.com.

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 homeowner.

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 or 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.

How is the amount of the tax credit determined?
The tax credit is equal to10 percent of the home's purchase price up to a maximum of $8,000.

Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. 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 phase-out range for the tax credit program is equal to $20,000. That is, 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.

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.

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 phase-out limits.

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.

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. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.

What home types 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.

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 15. 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).

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.

Do I qualify if I bought a home in 2008?
No, but if you purchased your first home between April 9, 2008, and January 1, 2009, you may qualify for a different tax credit. For more information, visit FederalHousingTaxCredit.com.

Great clip-

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Rob Kelly REALTOR®,CDPE
www.RobKellyColorado.com
www.DenverForeclosureTour.com

"Thinking of Real Estate? Think of Rob!"

Publish Date: 5/12/2009

Local foreclosure sales decline

© 2009 Longmont Times-Call

LONGMONT - The sale of foreclosed homes in Boulder County declined
25 percent in the first quarter, according to the Colorado Division of Housing.

One hundred foreclosed homes were sold in the January through March period, down from 134 in the first quarter of 2008.

Foreclosure filings, however, increased 5 percent, to 291 in the quarter, up from 278 during the same period last year.

Foreclosure filings indicate people who are seriously delinquent in their housing payments, while sales indicate the number of homes that are eventually sold through the foreclosure process, according to the Division of Housing.

Having a home sold through foreclosure is generally the most harmful to a homeowners' credit, according to the division, and it also means the owners lose all equity in the property that is sold.

Statewide, there was a 26 percent drop in foreclosure sales during the quarter, to 4,354 from 5,899 last year.

Foreclosure filings statewide were also down, to 10,745 from 11,634 last year.

The Division of Housing's report showed that the 12 most populous counties in Colorado account for 95 percent of foreclosure activity, and counties with the highest foreclosure rates tend to be along the Front Range.

In the Denver metro area, Boulder County had the lowest foreclosure rate at 1 completed foreclosure for every 1,157 households.

Among other metro-area counties, Adams County, with 1 filing for every 238 households and Weld County, with 1 filing every 245 households, had the highest rates.

REAL ESTATE MARKET UPDATE

An Information Service of RE/MAX Alliance/Boulder Valley

May/2009

If you read the newspaper, watch the news on television or religiously track the ups and downs of the stock market, there appears to be a general feeling in people's minds that things are getting better economically in this country. At least on the surface, they don't appear to be getting worse.

According to the Federal Government, job losses continue, but at a slower rate than has been experienced recently. The stock market has rallied over the course of the past few months and regained a portion of its losses. Home mortgage interest rates continue to vacillate between 4.75% and 5.25% for a fixed-rate thirty year loan. Most of us have survived the two great government revenue source days - income tax day (April 15^th) and property tax day (April 30^th).

One of the methods of evaluating today's local real estate market is to take a look back. To compare what has happened in the past to what is happening now. An area that many homeowners are concerned about is the value of their home. How has it been impacted over the course of the past few years?

Below is a brief overview of the housing market for single family homes in Boulder County from IRES (MLS) through April of each year.

Year Active Listings # of Sales Avg. Sales Price % Change

2009 2105 570 $400,911 -8.24%

2008 2410 939 $436,938 -5.81%

2007 2408 1028 $463,896 +8.20%

2006 2410 1249 $428,726 ---------

What are some of the reasons the average sales price has decreased over the past couple of years?

The one you might initially consider is that home values have declined. There is some degree of truth to that. In a negatively impacted economic environment, more expensive homes normally feel the price pinch first. As such, the average sales price of all the homes in a particular market drops.

Another reason for a lower average sales price is that more homes are selling on the lower end and thus the average sales price is less. This is true of the Boulder Valley real estate market as lower mortgage interest rates and government tax incentives have brought more first-time homebuyers into the market.

A third reason is the impact on values from bank foreclosures and HUD properties. These properties often, but not always, sell below area home values. This impacts the average sales price of a neighborhood and geographic area. It also affects appraised values of other homes.

Finally, there are the occasional "fire sales", where a homeowner desperately needs to sell. This is most often because of personal reasons i.e. job loss, divorce, health reasons, change of life circumstances, economic conditions, etc. Basically, the seller simply needs to rid themselves of their home so they can move-on with their lives.

Compliments of RE/MAX Alliance-Louisville, CO

School is out in less than a month. Have you found camps for your kids? Here is the 2009 Summer Camp guide for Boulder County.

2009 Summer Camp Guide