$8,000 HOMEBUYER'S TAX CREDIT EXTENDED -
President Obama reups popular tax credit through June 2010 and expands it to include people with higher incomes and some who want to trade up into new homes.
NEW YORK (CNNMoney.com) -- President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday. . . . . read article
Monday, November 16, 2009
Thursday, October 1, 2009
Mortgage Delinquencies - The Coming Storm
As realtors, we know the foreclosure storm is not over by any means. But I wonder how much of the general public realizes this. Keep reading for a well written article on what's ahead.
Jeff Geoghan MBA - Lancaster PA Real Estate Expert writes:
This is one of those posts where I wish I didn't have to write it, but felt it was so important to my readers that I would be remiss not to at least talk about it. more . . .
Jeff Geoghan MBA - Lancaster PA Real Estate Expert writes:
This is one of those posts where I wish I didn't have to write it, but felt it was so important to my readers that I would be remiss not to at least talk about it. more . . .
Friday, August 21, 2009
Housing affordability high!!
Housing Affordability Continues to Hover Near Highest Level in 18 Years
RISMEDIA, August 21, 2009-Bolstered by affordable interest rates and low prices, nationwide housing affordability during the second quarter of 2009 continued to hover near its highest level since the series began 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI).
The HOI showed that 72.3% of all new and existing homes sold in the second quarter of 2009 were affordable to families earning the national median income of $64,000, down only slightly from the record-high 72.5% during the previous quarter and up from 55.0% during the second quarter of 2008.
“The increase in affordability-along with the $8,000 federal tax credit for home buyers-is stimulating demand, particularly among young, first-time buyers,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “But to keep the recent upturn in home sales going into next year, Congress will need to extend the tax credit for another year and make it available to all buyers in an effort to encourage activity in the trade-up market.”
Robson noted that the tax credit, which expires on Nov. 30, is currently limited to just buyers purchasing their first home.
Indianapolis, once again, was the most affordable major housing market in the country during the second quarter. Almost 95% of all homes sold were affordable to households earning the area’s median family income of $68,100. Indianapolis has now topped the affordability list 16 consecutive quarters.
Also near the top of the list of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Detroit-Livonia-Dearborn, Mich.; Dayton, Ohio; and Grand Rapids-Wyoming, Mich.
Several smaller housing markets posted even higher affordability scores than Indianapolis, with Kokomo, Ind. outscoring all others. There, almost 98% of homes sold during the second quarter of 2009 were affordable to median-income earners. Other small housing markets ahead of Indianapolis on the affordability scale included Lansing-East Lansing, Mich.; Mansfield, Ohio; Elkhart-Goshen, Ind.; Lima, Ohio; and Bay City, Mich.
New York-White Plains-Wayne, N.Y.-N.J., where just over 21% of all homes sold during the period were affordable to those earning the median income of $64,800, was once again the nation’s least affordable major housing market in the second quarter. This was the New York metro area’s fifth consecutive appearance at the bottom of the list. Other major metro areas near the bottom of the affordability chart included San Francisco; Honolulu; Los Angeles-Long Beach-Glendale, Calif.; and Santa Ana-Anaheim-Irvine, Calif.
Among smaller metro areas, San Luis Obispo-Paso Robles, Calif. was the least affordable market, followed by Ocean City, N.J.; Santa Cruz-Watsonville, Calif.; Flagstaff, Ariz.; and Santa Barbara-Santa Maria-Goleta, Calif., respectively.
RISMEDIA, August 21, 2009-Bolstered by affordable interest rates and low prices, nationwide housing affordability during the second quarter of 2009 continued to hover near its highest level since the series began 18 years ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI).
The HOI showed that 72.3% of all new and existing homes sold in the second quarter of 2009 were affordable to families earning the national median income of $64,000, down only slightly from the record-high 72.5% during the previous quarter and up from 55.0% during the second quarter of 2008.
“The increase in affordability-along with the $8,000 federal tax credit for home buyers-is stimulating demand, particularly among young, first-time buyers,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “But to keep the recent upturn in home sales going into next year, Congress will need to extend the tax credit for another year and make it available to all buyers in an effort to encourage activity in the trade-up market.”
Robson noted that the tax credit, which expires on Nov. 30, is currently limited to just buyers purchasing their first home.
Indianapolis, once again, was the most affordable major housing market in the country during the second quarter. Almost 95% of all homes sold were affordable to households earning the area’s median family income of $68,100. Indianapolis has now topped the affordability list 16 consecutive quarters.
Also near the top of the list of the most affordable major metro housing markets were Youngstown-Warren-Boardman, Ohio-Pa.; Detroit-Livonia-Dearborn, Mich.; Dayton, Ohio; and Grand Rapids-Wyoming, Mich.
Several smaller housing markets posted even higher affordability scores than Indianapolis, with Kokomo, Ind. outscoring all others. There, almost 98% of homes sold during the second quarter of 2009 were affordable to median-income earners. Other small housing markets ahead of Indianapolis on the affordability scale included Lansing-East Lansing, Mich.; Mansfield, Ohio; Elkhart-Goshen, Ind.; Lima, Ohio; and Bay City, Mich.
New York-White Plains-Wayne, N.Y.-N.J., where just over 21% of all homes sold during the period were affordable to those earning the median income of $64,800, was once again the nation’s least affordable major housing market in the second quarter. This was the New York metro area’s fifth consecutive appearance at the bottom of the list. Other major metro areas near the bottom of the affordability chart included San Francisco; Honolulu; Los Angeles-Long Beach-Glendale, Calif.; and Santa Ana-Anaheim-Irvine, Calif.
Among smaller metro areas, San Luis Obispo-Paso Robles, Calif. was the least affordable market, followed by Ocean City, N.J.; Santa Cruz-Watsonville, Calif.; Flagstaff, Ariz.; and Santa Barbara-Santa Maria-Goleta, Calif., respectively.
Thursday, August 13, 2009
Have you been thinking about selling?
Top 10 Signs That It's Time to Sell Your Home
10. You can't make any improvements to the exterior of your home without getting approval from the Board of Historic Monuments.
9. Your bathroom is a lovely shade of avocado green -- from the first time it was in style.
8. You have to move the furniture to see the carpet's original color.
7. You haven't visited the other half of the house in six months.
6. All the children's rooms are now guest bedrooms.
5. Your phone number is on your plumber's speed dial.
4. The plumber's phone number is on your speed dial.
3. The swing set in the backyard has sprouted roots.
2. You can't get any appliances repaired because "they stopped making those parts years ago."
And the Number 1 sign that it’s Time to Sell Your Home…
1. When you bought your house, you lived in the country. Now you're surrounded by high rises.
10. You can't make any improvements to the exterior of your home without getting approval from the Board of Historic Monuments.
9. Your bathroom is a lovely shade of avocado green -- from the first time it was in style.
8. You have to move the furniture to see the carpet's original color.
7. You haven't visited the other half of the house in six months.
6. All the children's rooms are now guest bedrooms.
5. Your phone number is on your plumber's speed dial.
4. The plumber's phone number is on your speed dial.
3. The swing set in the backyard has sprouted roots.
2. You can't get any appliances repaired because "they stopped making those parts years ago."
And the Number 1 sign that it’s Time to Sell Your Home…
1. When you bought your house, you lived in the country. Now you're surrounded by high rises.
Wednesday, July 22, 2009
First Time Homebuyer Federal Tax Credit Info - Time is running out!!
On February 17, 2009, President Obama signed important housing legislation that revises and extends the tax credit provisions of The Home Recovery Act of 2008 . . . read more
Tuesday, July 14, 2009
Staging a vacant home -
Vacant Home Staging Basics
Yesterday, my partner Alana and I received our third inquiry from a Realtor about what was involved in staging an empty house they had listed. This particular house had gone on the market at the beginning of December and had received very little interest. The family had already moved out and left nothing behind. We were asked by the realtor, did we think it was worth it to stage the house to garner fresh leads and interest from buyers? Well, you tell us what you think. Of the two photos below, which one would you rather market or buy? Which one do you think would give buyers the best sense of room proportions and house potential?
read more . . .
Yesterday, my partner Alana and I received our third inquiry from a Realtor about what was involved in staging an empty house they had listed. This particular house had gone on the market at the beginning of December and had received very little interest. The family had already moved out and left nothing behind. We were asked by the realtor, did we think it was worth it to stage the house to garner fresh leads and interest from buyers? Well, you tell us what you think. Of the two photos below, which one would you rather market or buy? Which one do you think would give buyers the best sense of room proportions and house potential?
read more . . .
Tuesday, June 30, 2009
Market Predictions
This is an article I read the other day. It pretty much confirms other market predictions we are hearing. Read on . . . or not.
Everyone would like a crystal ball to see into the future. What stocks should we buy? Who should we marry? Should we order the veal? Everyone from fortune tellers to stockbrokers act as though they know—and as though we should listen to them. When their predictions come true, we go back for more predictions. When they don't—well, some of us go back anyway.
When we set out to determine what housing prices would be in the year 2012, we knew that there was no way to know for sure. But in working with Brookfield, Wisc.-based research firm Fiserv, we weighed historical data against current trends to get a bead on which way the markets might jump at one-year increments. By combining data, we were able to get a pretty good idea of what home prices would be in three years' time. Across the board, real estate prices will continue to drop before rising slightly by the fourth quarter of 2011. Why is that important? Given the wretched state of the real estate market today, both homeowners and potential buyers might be better able to make an informed decision about when, and whether, they should move or stay put. Obviously, we can't guarantee that our data will hold up—although we think it will—but what does become clear is that even the worst-hit markets will begin to see improvement by 2012.
Everyone would like a crystal ball to see into the future. What stocks should we buy? Who should we marry? Should we order the veal? Everyone from fortune tellers to stockbrokers act as though they know—and as though we should listen to them. When their predictions come true, we go back for more predictions. When they don't—well, some of us go back anyway.
When we set out to determine what housing prices would be in the year 2012, we knew that there was no way to know for sure. But in working with Brookfield, Wisc.-based research firm Fiserv, we weighed historical data against current trends to get a bead on which way the markets might jump at one-year increments. By combining data, we were able to get a pretty good idea of what home prices would be in three years' time. Across the board, real estate prices will continue to drop before rising slightly by the fourth quarter of 2011. Why is that important? Given the wretched state of the real estate market today, both homeowners and potential buyers might be better able to make an informed decision about when, and whether, they should move or stay put. Obviously, we can't guarantee that our data will hold up—although we think it will—but what does become clear is that even the worst-hit markets will begin to see improvement by 2012.
Tuesday, May 19, 2009
Distressed Properties and First-Time Home Buyers - The Recipe for Real Estate Recovery?
Distressed Properties and First-Time Home Buyers - The Recipe for Real Estate Recovery?
Posted By Paige On May 18, 2009 @ 4:01 pm In Today's Top Story, Today's Top Story - Consumer, Top 5 Comments Disabled
RISMEDIA, May 19, 2009-(MCT)-Value-conscious, first-time buyers have become key to the housing market’s recovery, and they are snapping up priced-right foreclosures despite the warts-and-all, sold-as-is condition of the properties. Half of the sales made in the year’s first quarter were to first-time buyers and almost half of all these sales were distressed properties, the National Association of Realtors reported. Distressed properties include foreclosures and short sales, which are private transactions in which a homeowner sells the property for less than the amount owed on a mortgage.
The glut of foreclosures has pushed down home values, so heightened interest in buying them benefits the immediate neighborhood and the overall housing market.
“It’s a very good first step,” said Lance Ramella, a principal at RW Real Estate Advisors in Oakbrook Terrace. “The first step is selling the most value-conscious units and those are the foreclosures. We’re not going to see any real sustainable price appreciation until we move the foreclosures off the inventory list.”
Moving homes off the foreclosure inventory list may take a while though. With the lapse of several industrywide foreclosure moratoriums, lenders nationwide are initiating foreclosure proceedings again. Government-led efforts to refinance or modify troubled loans can’t help the rising number of people unable to pay their mortgages because they’ve lost their jobs.
In Illinois, more than 7,300 homes became bank-owned during the year’s first quarter, according to RealtyTrac. It’s impossible to determine how many of them are listed for sale, or sold, at any one time because the area’s real estate listing service doesn’t require a property to be listed as a foreclosure.
To capture new interest in home sales thanks to lower interest rates and a first-time-buyer tax credit, a growing number of lenders and asset management companies that own foreclosed homes now appear more willing to drop prices. Banks used to hold fast on pricing and held back properties so they didn’t flood the market, but that has changed, said Susan Sirles Fidler, an agent at Re/Max 10 in Oak Lawn who works with lenders.
Attractive pricing is causing a noticeable increase in multiple offers. In just the past two weeks, a two-bedroom, two-bath Lincoln Park condo listed at $289,000 garnered 60 showings in two days and 20 offers; it sold for just over $330,000. A vandalized East Village penthouse that needed at least $80,000 in repairs was listed at $159,000 and sold for $245,000. In Northbrook, a foreclosed home listed at $719,000 received multiple offers and sold for $730,000.
A bidding battle on a foreclosure with potential “is not the exception,” said Henry Torn, a buyer’s agent at Chicago Realty Partners.
The uptick in interest is encouraging to lenders as well. “That’s what gives us hope,” said Sanjiv Das, chief executive of CitiMortgage. “It’s positive, healthy activity. We’re actively lending to that end of the market, the owner-occupant.”
Finding diamonds in the rough can be a test of stamina, determination and an ability to hold one’s breath. There can be evidence of vandalism, water damage, multicolor mold and squatters who didn’t have access to bathroom facilities because the plumbing fixtures were stolen.
“This is not for the faint of heart,” said Marki Lemons, an agent with Rubloff Residential Properties, who carries a flashlight into properties and keeps paper masks in her car. “You have to be patient, be non-judgmental and have some vision. You have to decide if you can stomach this.”
Others are in decidedly better shape, in part either because companies are offering departing homeowners cash for keys and a clean property or they are sprucing up the properties before they put them on the market.
“These asset managers are at a point where they’re writing checks and trusting the Realtor to get the work done and put it on the market,” said Dean Rouso, owner of Prime Property Partners in La Grange. “We’re helping the neighborhoods because instead of having this comparable property out there for $99,000, we now have a comp for $150,000.”
Not all buyers, however, find themselves on the winning end of foreclosure deals, and that is causing them to look for value in the traditional market.
Copyright (c) 2009, Chicago TribuneDistributed by McClatchy-Tribune Information Services.
Posted By Paige On May 18, 2009 @ 4:01 pm In Today's Top Story, Today's Top Story - Consumer, Top 5 Comments Disabled
RISMEDIA, May 19, 2009-(MCT)-Value-conscious, first-time buyers have become key to the housing market’s recovery, and they are snapping up priced-right foreclosures despite the warts-and-all, sold-as-is condition of the properties. Half of the sales made in the year’s first quarter were to first-time buyers and almost half of all these sales were distressed properties, the National Association of Realtors reported. Distressed properties include foreclosures and short sales, which are private transactions in which a homeowner sells the property for less than the amount owed on a mortgage.
The glut of foreclosures has pushed down home values, so heightened interest in buying them benefits the immediate neighborhood and the overall housing market.
“It’s a very good first step,” said Lance Ramella, a principal at RW Real Estate Advisors in Oakbrook Terrace. “The first step is selling the most value-conscious units and those are the foreclosures. We’re not going to see any real sustainable price appreciation until we move the foreclosures off the inventory list.”
Moving homes off the foreclosure inventory list may take a while though. With the lapse of several industrywide foreclosure moratoriums, lenders nationwide are initiating foreclosure proceedings again. Government-led efforts to refinance or modify troubled loans can’t help the rising number of people unable to pay their mortgages because they’ve lost their jobs.
In Illinois, more than 7,300 homes became bank-owned during the year’s first quarter, according to RealtyTrac. It’s impossible to determine how many of them are listed for sale, or sold, at any one time because the area’s real estate listing service doesn’t require a property to be listed as a foreclosure.
To capture new interest in home sales thanks to lower interest rates and a first-time-buyer tax credit, a growing number of lenders and asset management companies that own foreclosed homes now appear more willing to drop prices. Banks used to hold fast on pricing and held back properties so they didn’t flood the market, but that has changed, said Susan Sirles Fidler, an agent at Re/Max 10 in Oak Lawn who works with lenders.
Attractive pricing is causing a noticeable increase in multiple offers. In just the past two weeks, a two-bedroom, two-bath Lincoln Park condo listed at $289,000 garnered 60 showings in two days and 20 offers; it sold for just over $330,000. A vandalized East Village penthouse that needed at least $80,000 in repairs was listed at $159,000 and sold for $245,000. In Northbrook, a foreclosed home listed at $719,000 received multiple offers and sold for $730,000.
A bidding battle on a foreclosure with potential “is not the exception,” said Henry Torn, a buyer’s agent at Chicago Realty Partners.
The uptick in interest is encouraging to lenders as well. “That’s what gives us hope,” said Sanjiv Das, chief executive of CitiMortgage. “It’s positive, healthy activity. We’re actively lending to that end of the market, the owner-occupant.”
Finding diamonds in the rough can be a test of stamina, determination and an ability to hold one’s breath. There can be evidence of vandalism, water damage, multicolor mold and squatters who didn’t have access to bathroom facilities because the plumbing fixtures were stolen.
“This is not for the faint of heart,” said Marki Lemons, an agent with Rubloff Residential Properties, who carries a flashlight into properties and keeps paper masks in her car. “You have to be patient, be non-judgmental and have some vision. You have to decide if you can stomach this.”
Others are in decidedly better shape, in part either because companies are offering departing homeowners cash for keys and a clean property or they are sprucing up the properties before they put them on the market.
“These asset managers are at a point where they’re writing checks and trusting the Realtor to get the work done and put it on the market,” said Dean Rouso, owner of Prime Property Partners in La Grange. “We’re helping the neighborhoods because instead of having this comparable property out there for $99,000, we now have a comp for $150,000.”
Not all buyers, however, find themselves on the winning end of foreclosure deals, and that is causing them to look for value in the traditional market.
Copyright (c) 2009, Chicago TribuneDistributed by McClatchy-Tribune Information Services.
Monday, May 18, 2009
Wednesday, May 13, 2009
Exciting News!!
The Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment. Previously, most buyers wouldn't receive the funds until after they filed their tax return, and that deterred some people from using the !!credit.
May 13, 2009
Nine Frequently Asked Questions About the Home Buyer Tax Credit
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 aprincipal 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. 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.
7. 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.
8. 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.
9. 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.
NAHB is providing the information on this web site for general guidance only. Theinformation on this site does not constitute the provision of legal advice, tax advice,accounting services, investment advice, or professional consulting of any kind norshould it be construed as such. The information provided herein should not be used asa substitute for consultation with professional tax, accounting, legal, or other competentadvisers. Before making any decision or taking any action on this information, youshould consult a qualified professional adviser to whom you have provided all of thefacts applicable to your particular situation or question. None of the tax information onthis web site is intended to be used nor can it be used by any taxpayer, for the purposeof avoiding penalties that may be imposed on the taxpayer. The information is provided"as is," with no assurance or guarantee of completeness, accuracy, or timeliness of theinformation, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particularpurpose.
1201 15th Street, NW
Washington, DC 20005
202-266-8200
800-368-5242
Copyright © 2009
National Association of Home Builders.
All rights reserved.
Nine Frequently Asked Questions About the Home Buyer Tax Credit
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 aprincipal 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. 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.
7. 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.
8. 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.
9. 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.
NAHB is providing the information on this web site for general guidance only. Theinformation on this site does not constitute the provision of legal advice, tax advice,accounting services, investment advice, or professional consulting of any kind norshould it be construed as such. The information provided herein should not be used asa substitute for consultation with professional tax, accounting, legal, or other competentadvisers. Before making any decision or taking any action on this information, youshould consult a qualified professional adviser to whom you have provided all of thefacts applicable to your particular situation or question. None of the tax information onthis web site is intended to be used nor can it be used by any taxpayer, for the purposeof avoiding penalties that may be imposed on the taxpayer. The information is provided"as is," with no assurance or guarantee of completeness, accuracy, or timeliness of theinformation, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particularpurpose.
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