South Orange County Blog from Bob Phillips

Some first time California home buyers seem poised to get $18,000 in tax credits.

Posted in Down payment assistance, home affordability, Real estate, taxes by southorangecounty on March 28, 2010

There is an interesting wrinkle with the new bill just signed by Governor Schwarzenegger, regarding tax credits for California home buyers – state bill AB 183.

Here is some language from that bill: “Requires buyers to close escrow between May 1 and Dec. 31 to qualify.” ( For an up to $10,000. tax credit.)

The interesting part of that is this: The Federal first time homebuyer tax credit of up to $8000. clearly states that “The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.” ( From the Government’s Making Home Affordable website: http://www.federalhousingtaxcredit.com/glance.php )

So, if I read that correctly – and remember, I am NOT a qualified tax preparer, or attorney – that seems to suggest that if you are IN escrow before May 1st, 2010, and close escrow prior to July 1st, 2010, you might qualify to receive BOTH tax credits.

If you happen to be one of those fortunate California home buyers, and you seem to qualify, you should definitely look into this potential windfall.

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7 Weeks Remain To Find A Home, Claim Up To $8,000 In Tax Credits

Posted in Real estate, taxes by southorangecounty on March 9, 2010

In
November, Congress extended and expanded the First-Time Home Buyer Tax
Credit program to include a subset of “move-up” buyers — homeowners
that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.

To
be eligible, home buyers must be under contract for a new home no later
than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:
    You can’t purchase the home from a parent, spouse, or child
    You can’t purchase the home from an entity in which the seller is a majority owner
    You can’t acquire the home by gift or inheritance
    Each buyer in the purchase must meet eligibility requirements
There’s other criteria, too.

For
one, the sales price on the subject property cannot exceed $800,000.
Homes sold for more than $800,000 are ineligible for the tax credit.
Furthermore, households earning more than $125,000 as single-filers, or
$225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website,
or, you may just find it simpler to speak with your accountant about
it. There are some nuances in qualifying for and claiming the tax
credit on your returns and getting a professional’s opinion is always
wise.

And lastly, don’t forget that government’s tax credit
program is a true tax credit. It’s not a tax deduction. This means
that a tax filer whose “normal” tax liability is $3,500 and who is
eligible for $8,000 in credit will receive a $4,500 refund from the
U.S. Treasury.

If you’re currently in the House Hunt, mark your
calendar for April 30, 2010. It’s 7 weeks away and you can be sure that
as the date gets closer, buyer traffic is going to increase. You may
find sellers more willing to negotiate today than several weeks from
now.

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There’s 100 Days Left To Claim The Homebuyer Tax Credit

Posted in Down payment assistance, home affordability, Real estate, taxes by southorangecounty on January 24, 2010

100 days remain for the Home Buyer Tax Credit ExpirationNovember 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program.  There’s 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, “move-up” buyers were also added to the program’s eligibility list meaning you don’t have to be a first-time home buyer to be eligible for the tax credit.  If you’ve lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

The tax credit’s basic eligibility requirements remain the same:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which they’re a majority owner
  • You can’t acquire the home by gift or inheritance
  • All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

First, the subject property’s sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible.  And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

And lastly, don’t forget that the program is a true tax credit — not a deduction.  This means that a tax filer who’s eligible for the full $8,00 credit and whose “normal” tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

The complete list of qualifying criteria is posted on the IRS website.  Review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

There’s just 100 days to go.

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The new $6,500 federal tax credit for ‘move-up’ home buyers may benefit you

Posted in home affordability, Real estate, taxes by southorangecounty on November 15, 2009

If you fit the criteria and are considering buying another house in the coming year, you might want to speed up the process and close by the June 30 expiration date.

By Kenneth R. Harney, in today’s Los Angeles Times

November 15, 2009

Reporting from Washington – Take a close, hard look at the new $6,500 federal tax credit for so-called move-up home buyers that passed the Senate and House recently. Though it’s been getting second billing to the original $8,000 credit for first-time purchasers — now extended by Congress through June 30 — the $6,500 credit for current homeowners just might have your name on it.

How does it work? When will it be available?

The new credit is available now. It took effect Nov. 6, the day President Obama signed the legislation that created it. This means that if you fit the key criteria — you’ve owned and lived in your home for a consecutive five out of the last eight years, and your adjusted household income doesn’t exceed $125,000 if you file taxes singly or $225,000 if you are married filing jointly — you can claim the credit as soon as you close on a qualifying house.

That could be next week, next month or next spring. There is no “move-up” requirement in the new credit. In fact, homeowners who plan to downsize into a smaller dwelling may prove to be significant users of the credit, along with people who are moving because of employment changes.

If you fit the criteria and are considering buying another house sometime in the coming year, you might want to speed up the process and sign a contract by April 30 and close by the June 30 expiration date. Think of it this way: If the government is willing to give you $6,500 to act a little faster than you had planned, hey, why not?

Some other key features of the $6,500 credit you ought to know about:

* Whatever you intend to buy, the house cannot cost more than $800,000.

* The replacement house must become your main home. There is no requirement in the legislation that you sell your current home. You could rent it out, turn it into a second home or list it for sale later in 2010 when prices might be higher. If you plan to retain it, however, make sure that you move into the new house on the day you close so that there is no question it was your principal residence at that time.

* Like the first-time buyer credit, the $6,500 version permits a variety of dwelling types for your purchase. These include new or existing single-family homes, condominiums, manufactured or mobile homes, and boats that function as your principal residence. You cannot claim the credit if you are buying a second home or an investment property.

* The Internal Revenue Service is required by Congress to scrutinize claims for tax credits — both for the $6,500 and the $8,000 credits — far more closely in the coming months than it did earlier this year. This is because federal investigators have documented significant instances of fraud — supposed home buyers who were as young as 4, and “sales” that were fabricated. Investigators also found numerous cases of technical violations, such as purchase transactions among immediate family members, which are prohibited.

The revised rules require taxpayers to submit copies of their settlement statements (HUD-1 forms), along with their requests for credits using IRS Form 5405. Congress’ new rules also prohibit individuals under the age of 18 or who are counted as dependents on another taxpayer’s filings from claiming the credit.

* Home buyers in 2009 — those who go to closing after Nov. 6 but no later than Dec. 31 — can claim the $6,500 credit on their 2009 federal tax returns, or amend their 2008 returns. Similarly, eligible buyers in 2010 will be able to file for the credit on their 2009 returns or 2010 returns. Talk to your tax advisor regarding timing decisions.

* If you aren’t sure if you can make the deadlines established for the new credit — a binding contract by April 30 and a settlement by June 30 — do not assume that Congress will provide another extension. All the political and budgetary signs point the other way, and some of the primary authors of the credit insist that this is it — no more extensions next year. Take them at their word.

One consumer resource that answers frequently asked questions about both the $6,500 and $8,000 extended credits is www.federalhousingtaxcredit.com, sponsored by the National Assn. of Home Builders.

kenharney@earthlink.net

Distributed by the Washington Post Writers Group. 

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Congress Expands And Extends The First-Time Home Buyer Tax Credit

Posted in home affordability, Real estate, taxes by southorangecounty on November 6, 2009

First-Time Home Buyer expanded and extendedCongress both extended and expanded the First-Time Home Buyer Tax Credit program Thursday. 


The White House says the President will sign it into law today.


The up-to-$8000 tax credit’s expiration date has been pushed forward to spring, requiring homebuyers to be under contract by April 30, 2010, and to be closed by June 30, 2010.


The program’s basic eligibility requirements remain the same:



  • Buyers can’t purchase the home from a parent, spouse, or child
  • Buyers can’t purchase the home from an entity in which they’re a majority owner
  • Buyers can’t acquire the home by gift or inheritance
  • All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 


For one, the definition of “first-time home buyer” has been expanded to include most homeowners with at least 5 years in their current home.  “Move-up” buyers like these are now eligible for IRS tax credits, but with a cap at $6,500.


This means that you don’t have to be a true first-time home buyer to claim the “first-time home buyer tax credit”.


Other eligibility changes include:



  • The subject property’s sales price may not exceed $800,000
  • The subject property must be a primary residence
  • Income thresholds raised to $125,000 for single-filers and $225,500 for joint-filer

And remember, the First-Time Home Buyer program grants a tax credit as opposed to a deduction.  This means that a tax filer would receive a cash payment of $2,000 from the U.S. Treasury if his “normal” tax liability totals $6,000 and he was eligible for all $8,000 available under the new law.


The complete list of qualifying criteria is posted on the IRS website.  Be sure to review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2009.


It’s 5 months away.

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You’ve Got 15 More Days To Use The First-Time Home Buyer Tax Credit

Posted in Down payment assistance, home affordability, Real estate, taxes by southorangecounty on October 1, 2009

First-Time Home Buyer Tax Credit expires November 30, 2009The government’s First-Time Home Buyer Tax Credit program expires November 30, 2009 — a scant 60 days from today.


Considering it can take up to 60 days to close on a home, first-time buyers have 2 weeks at most to find a home.


Buyers not under contract by October 15 have little chance of meeting the November 30 deadline and, therefore, little chance of claiming the tax credit.


This is especially true for purchases involving short sales and foreclosures.


Congress passed the First-Time Homebuyer Tax Credit program as part of the 2009 economic stimulus plan.  IRS Form 5405 outlines the program criteria which include the following stipulations:



  • Buyer may not have owned a “main home” in the past 36 months
  • The home may not be purchased from a parent, spouse, or child
  • Adjusted gross income for the household must be below $95,000 for single tax filers and $170,000 for joint tax filers

The credit is capped at $8,000 or 10% of the purchase price, whichever is less.  And don’t forget — the First-Time Home Buyer Tax Credit is a true tax credit. It’s not a deduction.


This means that a tax filer who claims the full $8,000 and whose “normal” tax liability is $5,000 would receive $3,000 cash from the US Treasury when their tax return is processed by the IRS.


If you can’t close by November 30, 2009, though, you can’t claim the credit.


The clock is ticking. If you’re planning to use the First-Time Home Buyer Tax Credit, the time to act is now.

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To Use The $8,000 First-Time Home Buyer Tax Credit Program, There’s Now Just 6 Weeks To Find A Home

Posted in Down payment assistance, home affordability, Real estate, taxes by southorangecounty on August 20, 2009

8000 First Time Homebuyer Tax CreditIf you plan to use the First-Time Home Buyer Tax Credit program, time is running out.  The program expires November 30, 2009 and closing on a home can take up to 60 days.


That leaves you 6 weeks from today to find a home and go under contract.


The First-Time Homebuyer Tax Credit program was passed as part of the 2009 economic stimulus plan. It credits up to $8,000 in tax payments to qualified buyers.


The qualification criteria are as follows:



  • Buyer may not have owned a “main home” in the past 36 months
  • The home may not be purchased from a parent, spouse, or child
  • Adjusted gross income for the household must be below $95,000 for single tax filers and $170,000 for joint tax filers

Furthermore, not everyone who’s qualified will get the full $8,000. The credit can’t exceed 10 percent of a home’s purchase price, for example, and households with income approaching program limits get lesser benefits, too.


Meanwhile, an interesting note about the First-Time Home Buyer Tax Credit is that it’s a true a tax credit and not a deduction.  A person claiming the $8,000 credit whose “normal” tax liability is $5,000 would get a $3,000 refund from the IRS on April 15, 2010.


Review the program’s criteria at your leisure, but don’t wait until October to start looking for homes. If you can’t close by November 30, 2009 for any reason whatsoever, you won’t qualify for the tax credit. 


Better to be ahead of the deadline than chasing it.

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The First-Time Home Buyer Tax Credit : Use It By December 1, 2009 Or Lose It

Posted in home affordability, Real estate, taxes by southorangecounty on July 17, 2009

The First Time Home Buyer Tax Credit Expires December 1 2009The government’s First-Time Home Buyer Tax Credit expires December 1, 2009. 


If you expect to use the program in conjunction with a home purchase, therefore, you may want to consider yourself officially “on the clock”. 


Assuming a 60-day window between contract and closing, there are now 77 days left to find a home and go under contract for it.


The First-Time Home Buyer Tax Credit refunds up to $8,000 at Tax Time for qualified home buyers.  A few of the program’s qualification criteria include:



  • Home buyer must not have owned a primary residence in the past 36 months
  • The home may not be purchased from a family member
  • The household adjusted gross income must be below $95,000 for single tax filers and $170,000 for joint tax filers

The tax credit itself is limited to $8,000 or 10% of the purchase price, whichever is less. 


Remember, though: The refund is a true tax credit — not a deduction.  This means that a taxpayer owing $8,000 to the IRS and claiming the $8,000 First-Time Home Buyer Tax Credit would owe the IRS nothing on April 15, 2010.


The complete list of qualifying criteria is posted on the IRS website.

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From The IRS : The First-Time Homebuyer Credit Form

Posted in Real estate by southorangecounty on March 4, 2009

IRS Form 5405 -- Homebuyer Tax CreditAs part of the American Recovery and Reinvestment Act of 2009, the IRS has officially released Form 5405 — better known as the First-Time Homebuyer Credit Form.


True to tax code standards, the 10-field form is accompanied by 3 pages of instructions.


Form 5405 is a helpful, go-to resource for home buyers with questions about the tax credit.


For example, the form distinguishes tax consequences for homes bought in 2008 versus 2009, and clearly defines the term “first-time home buyer”.


In addition, Form 5405 highlights the math behind the tax credit.  In general, the First-Time Homebuyer Credit is equal to the lesser of:



  • $8,000 for homes bought in 2009
  • 10 percent of the home’s purchase price

Married couples filing separately are entitled to half of the expected credit, and homes sold within 3 years are subject to a credit repayment in the year the home ceases to be the “main home”.


Form 5405 is a comprehensive reference.  However, be sure to check with your accountant for specific questions about your personal returns and how the First-Time Homebuyer Credit may impact your finances.  There is no substitute for professional, paid advice.

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