FINANCING
Homebuyer Tax Credit Extended!!!
On November 6, 2009, President Obama signed a bill to extend the tax credit for first-time homebuyers through June 30, 2010 at a maximum purchase price of $800,000! The bill also opens up opportunities for others who are not buying a home for the first time.
WHO GETS WHAT?
First-time Homebuyers (FTBHs): 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 $8,000.00.
Current Homeowners: 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.
THE NEW DEADLINE
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.
TAX CREDIT VS. TAX DEDUCTION
It’s important to remember that the tax credit is just that… a tax credit. Tax credit is a direct reduction in tax liability, owed by an individual to the Internal Revenue Service (IRS). The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.
Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!
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 receive a partial credit. However, 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.
HOW MUCH ARE FTHBs 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 FOR 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.
IF A PARENT (WHO WILL NOT LIVE ON THE PROPERTY) CO-SIGNS 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.
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:
- They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild.
- They do not use the home as their principal residence.
- They sell their home before the end of the year.
- They are a nonresident alien.
- They 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.)
- Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
As always, if you have any questions about your specific situation or would like to discuss how you may benefit from this program, please call or email us. We will be happy to sit down with you. –Tara and April
The Economic Stimulus Plan Benefits Housing and Mortgage
Today the President signed a $787 Billion Stimulus Plan made up of tax cuts and spending programs aimed at reviving the US economy.
Home owners and potential home buyers could benefit from key provisions in this stimulus plan.
First-time home buyers who purchase homes from the beginning of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit.
Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8 ) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
Facing Foreclosure?
Get HELP if you are facing foreclosure! The City of Riverside, along with multiple local agencies like the Fair Housing Council of Riverside County, have come together to assist residents facing foreclosure. Topics include:
- Can my home be saved from foreclosure?
- Where do I go from here?
- What programs and services may be available to help my family?
- Who do I contact?
See below for the FREE Foreclosure Prevention Town Hall Meeting Schedule:
Ward 1
Location: University Heights Middle School Gymnasium (1155 Massachusetts Avenue)
Date: October 1, 2008
Time: 6 – 8:30 p.m.
Ward 2
Location: UC-Riverside Extension “Room E” (1200 University Avenue)
Date: October 8, 2008
Time: 6 – 8:30 p.m.
Ward 3
Location: Janet Goeske Senior Center (5257 Sierra Street)
Date: October 6, 2008
Time: 6 – 8:30 p.m.
Ward 4
Location: Amelia Earhart Middle School (20202 Aptos Street)
Date: October 22, 2008
Time: 6 – 8:30 p.m
Ward 5
Location: California Baptist University Copenbarger Room (8308 Magnolia Avenue)
Date: October 27, 2008
Time: 6 – 8:30 p.m.
Ward 6
Location: Collett Elementary School Multipurpose Room (10850 Collett Avenue)
Date: November 20, 2008
Time: 6 – 8:30 p.m.
Ward 7
Location: Norte Vista High School – Performing Arts Center (6585 Crest Avenue)
Date: December 4, 2008
Time: 6 – 8:30 p.m.
For more information, call (951) 826-2305 or click here to look up your ward. Don’t panic if you live in Ward 7 and can’t wait until the December 4th meeting — feel free to attend an earlier meeting in another ward! Please don’t ‘give up the ship’ until you’ve considered all of your options!
$7,500 Tax Credit Available to First-Time Homebuyers
This tax credit is not a gift or a grant but essentially a 15 year loan to the homebuyer and, while it is interest free, will require filing a tax return and will carry the same IRS penalties for non-payment as accrue to delinquent taxes.
Warnings duly noted, further information and the regulations regarding this tax credit are now available. If you have an interest in the program, here are some basic facts.
The credit is available only to first-time homebuyers defined as buyers who have not owned a principal residence for three-years prior to the subject purchase. The ownership test applies to both partners in a marriage; i.e. if a husband has not owned a home in the past three years but the wife has, neither spouse qualifies for the first-time home buyer tax credit. A buyer can still be eligible for the credit even if he owns a vacation home or rental property not used as a principal residence.
There is no need to fill out an application to qualify for the tax credit. First-time homebuyers merely claim the credit when filing the tax return for that year. No pre-approval is necessary, but if you are relying on this program to purchase a home you may want to check your eligibility. Your tax advisor may be able to help.
But like so many good things in life, time is of the essence for buyers who want to take advantage of this opportunity. Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible. Information on these and other details of the program can be researched on a website maintained by the National Association of Homebuilders at www.federalhousingtaxcredit.com.
Riverside County Housing Inventory Snapshot
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