Realtor Coaching & Training: first time home buyer credit
First Time Home Buyer Credit
As promised….here are the details for the home buyer tax credit.
It’s official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.
In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.
So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.Additionally, the 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.
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.Higher Income Caps in Effect
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.
Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.First-Time Homebuyer Tax Credit – Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.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.What is the tax credit for first-time homebuyers (FTHBs)?
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 for the 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 do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).Can you 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. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.
- You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
- You do not use the home as your principal residence.
- You sell your home before the end of the year.
- You are a nonresident alien.
- You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
- Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
- You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.
Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.
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Here it is….the news we have all been waiting to hear….
This is reason to celebrate….the ‘first time home buyer’ $8000 tax credit has been extended…and….you will love this….it now includes..
MOVE UP BUYERS.
Of course, there are many rule…limitations and other sticking points that you need to be aware of.
But, bottom line…they have extended the credit.
Watch the CNBC Video NOW
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As Promised, here is more breaking information about the just released Case-Shiller home sales data.
As you are about to learn homes sales ARE increasing all the while home values continue to erode. A few interesting bits from this video…unlike other real estate ‘future-tellers’ this CNBC video commentator believes that the lessor expensive homes will see further price erosion and more expensive homes may actually see home value APPRECIATION in 2010…..hmmmm…..what do you think.
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Stay closely tuned into TimandJulieHarris.com this week…..lots of housing related news happening that you will want to know about the very moment it hits.
Here is an interesting report that Goldman Sachs released earlier today.
Uncle Sam’s interventions in the housing market have pushed home prices 5% higher on a national average than they would have been otherwise, Goldman Sachs estimates in a report released late Friday.
I bet this number is actually low….students from across the US report to us how buyers are OVERPAYING for their Short Sales and REOs….
The government over the past year has slowed the pace of foreclosures through moratoria and the drive to modify mortgage terms to keep more borrowers in their homes. It also has pumped up demand for housing by giving tax credits to many first-time home buyers and by driving down mortgage interest rates.
Will the tax credit be extended? Read the news here.
As a result, home prices in some areas have risen in recent months, particularly for homes that appeal to investors and first-time buyers. Bidding wars for the more attractive bank-owned homes have become common.
We believe that even with further expected home value erosion in 2010 that homes priced below $200,000 have already experienced the bulk of their depreciation cycle.
But these artificial props won’t last forever and may have created a false bottom in the market. “The risk of renewed home-price declines remains significant,” Goldman economist Alec Phillips writes in the report, “and our working assumption is a further 5% to 10% decline by mid-2010.”
This is especially true for more expensive homes…as we reported several weeks ago…the next big surge of residential foreclosures will be homes that are more than the FHA lending limits.
Federal government policies encouraging loan mods have reduced the supply of homes on the market temporarily because it takes months for loan servicers (the firms that collect mortgage payments) to figure out which borrowers qualify. Some states have added their own restrictions on foreclosures that drag out the process further. In many cases, borrowers who get loan mods will default again within a year or so, meaning the problem has been delayed rather than solved.
Mods get a lot of bad press but, the fact remains that banks are doing loan mods. But, the borrower has to qualify. Watch the FREE Agent Loan Mod Secrets video now to learn how YOU CAN mod your own loan….and….learn how to make money from knowing how to offer loan mods to others.
That means there is a large but impossible-to-measure “shadow” inventory of homes that eventually will hit the market.
Goldman estimates the tax credit has boosted sales by 200,000 units. Congress is debating whether to extend that credit beyond Nov. 30. Goldman says it “appears likely to be extended for at least a few months but probably no longer than through the first half of 2010.”
And it appears that this will happen TOMORROW…read the report here.
Mammoth purchases of mortgage securities by the Federal Reserve appear to have held home mortgage rates about 0.30 percentage point lower than they would have been, Goldman says. Those purchases are due to be phased out in next year’s first quarter.
In March to be exact. What does this mean…? Higher interest rates and it WILL become tougher to get a loan.
The outlook for further government policy is “cloudy,” Goldman notes. But it is safe to assume that many politicians will remain loath to let the market run free and wild. Goldman points to legislation introduced by Sen. Jack Reed (D, R.I.) that would require mediation between borrowers and lenders before any foreclosures and mandate loan mods in some cases.
“At a minimum, the Reed proposal would slow the foreclosure process considerably,” helping to prevent price declines in the near term, Goldman says. It adds: “The tradeoff would come later, when many of the properties eventually make their way back onto the market through foreclosure.”
Agents, what does all of this mean to you? Simple, this is the new market. Learn how to help others and make money because of this market. The agents who are thriving NOW are the agents who have learned how to become REO Listing Agents. Know this…its not too late for you. Watch the FREE Agent REO Secrets video and then download the FREE Agent REO Secrets book.
Source: WSJ.com
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