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SPECIAL EDITION: National Association of Realtors President’s Podcast Hello everyone, and welcome to this special edition of the NAR President’s Podcast. In my last podcast I explained that Congress was close to passing a bill that includes an amendment to extend and expand the homebuyer tax credit. As of today – Thursday, November 5 Let me summarize the changes quickly now: When the President signs the bill, the expiration date for the credit will move to April 30, 2010. First-time buyers who have not had interest in a principle residence for three years are still eligible, and the maximum amount remains the same – $8,000 for married couples, $4,000 for those filing separately. Current homeowners, who have consecutively maintained the home they want to sell as their primary residence for five of the last eight years, are also eligible. However, the maximum amount for those homeowners is lower: $6,500 for married couples and $3,200 for those filing separately. The tax credit may not used to purchase a home for more than $800,000. All buyers who want to get the credit must include documentation of the purchase on their tax returns. th – that bill has passed and will be sent to President Obama for his signature. The income limits for both tax credits have been raised to $125,000 for single buyers and $225,000 for married couples. This is a major victory for consumers, REALTORS and the housing market. Charles McMillan, 2009 NAR President November 5, 2009 |
It looks as if we qualify for the move-up credit, but we signed a contract to buy our home before the president signed the new law. We're going to close at the end of November. Do we get the money? As long as you close after Nov. 6, you can qualify for the credit. The new credit is often referred to as a move-up credit. We plan to sell our home and retire to a smaller place. Is the $6,500 credit available only if you buy a more expensive home? Don't worry. "Move-up" is a misnomer often used to distinguish this from the first-time-buyer credit. It's OK to downsize. There are no rules about the cost of the house you sell or the home you buy, except that the new house can't cost more than $800,000. How do I claim a credit? The procedure is the same for both the first-time-buyer and longtime-resident credits. Once you close on a qualifying house, you claim a credit on your federal tax return . If you close in 2009, you can choose whether to claim the credit on the 2009 return you file next spring or on an amended 2008 return. Choosing the amended return would bring you a refund of the full credit amount. If you claim the credit on your 2009 return, it will reduce your tax bill for the year by the amount of your credit. This is what's called a refundable credit, so if the credit reduces your tax bill below zero, you'll get the difference as a tax refund. If you close on a home in 2010, you can claim the credit on either your 2009 or 2010 return. Sooner rather than later is the choice to make. You'll need to file a Form 5405 to claim the credit and include a copy of your settlement statement (such as the HUD 1 form) to prove that you bought the house. The settlement statement was not required for deals that closed before Nov. 7. Is there an age limit for the credit? Not on the upper end. But as part of an anti-fraud effort, neither homebuyer credit is available to taxpayers who were under age 18 at the time of the purchase. The discovery that taxpayers as young as 4 years old were claiming the first-time-buyer credit cast suspicion that some hanky-panky was going on. Married couples can qualify for the credit as long as one spouse is at least 18 at the time the deal is closed. The new law also bans anyone who is claimed as a dependent on someone else's return from claiming a homebuyer credit. Can I claim the credit for the purchase of a vacation home? How would the Internal Revenue Service know whether I was living there full time? The credits are available only for the purchase of a principal residence. As for how the IRS might know a new house is a vacation property, the fact that your tax return was filed from an address that's different from the address of the new property (which would be shown on the settlement sheet) might raise some eyebrows. If the IRS concludes that a claim is fraudulent, it can impose a 75% penalty, which would cost $6,000 on an $8,000 credit claimed for a vacation home.  Video: Real-estate deals for $200,000 and up
We bought a home Oct. 15, 2003, and sold it in August 2008. So we owned the home for slightly less than five years. We are renting an apartment now and are looking to buy a home. Do we qualify for the first-time-homebuyer tax credit as amended, assuming that we pass the necessary income tests? Sorry, but based on the facts you present, you're out of luck. To qualify for the first-time-buyer credit, you cannot have owned a home within the previous three years. You sold your previous home just 15 months ago. And it appears that your ownership of that home was a few months shy of five years, the minimum period of continuous ownership required for you to qualify for the longtime-resident credit. Can I qualify for both the first-time-buyer and longtime-resident credits? No. You can claim only one or the other. My husband's parents are offering to sell us their vacation home as our first home. Would we qualify for the first-time-buyer credit? Not anymore. The original first-time-buyer credit law disallowed the credit if the home sale was between related parties, but there was a loophole for the situation you describe. Since you are not related to your husband's parents, except by marriage, you could have qualified for the credit, assuming you bought the home jointly. The new law, however, puts the kibosh on that, effective for purchases after Nov. 6, 2009. This article was reported by Kevin McCormally for Kiplinger's Personal Finance Magazine. Published Nov. 12, 2009
Homebuyer credits: Who qualifies now? In my last podcast I explained that Congress was close to passing a bill that includes an amendment to extend and expand the homebuyer tax credit. As of today – Thursday, November 5 The side by side-by-side comparison of the changes is listed below. Here is a summary of the changes: When the President signs the bill, the expiration date for the credit will move to April 30, 2010. First-time buyers who have not had interest in a principle residence for three years are still eligible, and the maximum amount remains the same – $8,000 for married couples, $4,000 for those filing separately. Current homeowners, who have consecutively maintained the home they want to sell as their primary residence for five of the last eight years, are also eligible. However, the maximum amount for those homeowners is lower: $6,500 for married couples and $3,200 for those filing separately. The tax credit may not used to purchase a home for more than $800,000. All buyers who want to get the credit must include documentation of the purchase on their tax returns. |
How do I get my $8,000 Credit?
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Tax Credit Extended for First-time homebuyers! Obama signs bill: Homebuyer tax credit extended
WASHINGTON – Nov. 6, 2009 – President Obama signed H.R. 3548 this morning, enacting into law an extension, and adjustment, of the $8,000 tax credit for first-time buyers. Among other things, the extension adds money for certain move-up buyers; creates one deadline for signing a contract and a later deadline for closing; changes income requirements; and limits a purchased home’s cost to $800,000.
“Extending the homebuyer tax credit and expanding it to reach more homebuyers is the right thing to do,” says 2009 Florida Realtors® President Cynthia Shelton. “It is critical to maintaining the positive momentum we’ve been experiencing in the housing market and in the overall economy. Florida Realtors applaud congressional leaders for taking action to extend the homebuyer tax credit into 2010, which will help Florida families realize their dream of homeownership, improve our communities and strengthen our economy.”
Adds John Sebree, Florida Realtors vice president of public policy, “Florida residents enjoy two additional advantages. The Florida Homebuyer Opportunity Program (FHOP), created by the Florida Legislature earlier this year, still has approximately $28 million that first-time homebuyers can access and use toward their downpayment. And move-up buyers now have the ability to ‘port’ their current property tax savings to a new home.”
First-time homebuyers
Most details for first-time homebuyers mirror the rules currently in existence. The maximum tax credit remains $8,000 ($4,000 for married individuals filing separately), and anyone who has not owned a home within three years is considered a “first-time buyer.”
• A purchase must be under contract by April 30, 2010.
• A purchase under contract by April 30 must close no later than June 30, 2010.
• After Dec. 1, 2009, income limits rise to $125,000 for singles and $225,000 for married couples; up from limits effective through Nov. 30 of $75,000 for singles and $150,000 for married couples. The tax credit phases out incrementally at each $20,000 increase in income.
• Effective immediately: The maximum home value purchased cannot exceed $800,000. Prior to the law being signed, first-time homebuyers had no limitation on a home’s cost.
Current homeowner tax credit
An existing homeowner who purchases a home may now claim a tax credit of up to $6,500. To qualify, that owner must have owned and used the same residence as a principal residence for any consecutive five-year period in the previous eight years.
• This new tax credit is effective immediately. Eligible homebuyers do not have to wait until Dec. 1 to close in order to qualify.
• Personal income limits, maximum home value, and contract/closing deadlines are the same as those for first-time homebuyers.
Long-time Florida homeowners who enjoy discounted property taxes resulting from the state’s Save Our Homes amendment qualify for property tax portability, notes Sebree. For more information or to calculate how much tax savings can be transferred to a new home, visit floridarealtors.org at: http://www.floridarealtors.org/LegislativeCenter/TopInitiatives/index.cfm
Florida Homebuyer Opportunity Program
Under FHOP, first-time Florida homebuyers can obtain interest-free bridge loans to access their federal tax credit before they complete a home purchase, enabling them to use that money upfront for downpayment and closing costs. Once buyers submit their returns to the IRS and receive their tax credit money, they repay their loans to the state.
The Florida Realtors-backed program came out of the 2009 session of the Florida Legislature. However, as part of the 2009-2010 budget year, did not become effective immediately. They tax credit extension will allow many first-time buyers to tap into the approximately $28 million in the program's remaining funds.
While funded by the state, the money is distributed through the city and county housing offices that operate the State Housing Initiatives Partnership (SHIP) program. There is no standardized program, and each local agency may operate under different rules for distribution. For more information, buyers should contact their local SHIP office.
To find a local SHIP office, go to: http://apps.floridahousing.org/StandAlone/FHFC_ECM/AppPage_SHIPLGContacts.aspx.
Additional changes
The tax credit extension includes other new rules, such as:
• The new law also impacts dependent purchases of homes, which weren’t addressed under the old rules.
• The new law requires a buyer to attach documentation about the home purchase to his or her income tax return. An audit found that some buyers are claiming the tax credit when they don’t deserve it, and investigators continue to seek out fraud. To minimize tax abuse going forward, buyers won’t receive the credit without submitting proof to the Internal Revenue Service (IRS).
The homebuyer tax credit is collected as part of the normal income tax process. As a credit, it’s calculated separately from an individual’s income tax, and paid regardless of taxes owed or withheld from income. As always, however, only a tax planner can render specific advice to anyone seeking the credit. For more information on the credit, contact a tax planner or visit the IRS website at: .
Florida Realtors will update tax credit information and clarify details when available on the Homebuyer Center, part of floridarealtors.org at: http://www.floridarealtors.org/AboutFar/homebuyercenter/index.cfm .
© 2009 Florida Realtors®
The previous TAX CREDIT DETAILS Every homebuyer has unique circumstances and specific questions. Here are some answers.
WASHINGTON – Feb. 17, 2009 – How does a first-time homebuyer take advantage of the $8,000 tax credit that President Obama is expected to sign into law tomorrow? It comes with a few rules. According to the most recent analysis, the following rules will apply – though things could change as tax professionals weigh the details:
• The deduction is worth 10 percent of a home’s value up to $8,000, which means all homes worth more than $80,000 could qualify for the maximum amount.
• There is an income limit to qualify. A married couples’ modified adjusted gross income (MAGI) should be under $150,000 and single filers’ MAGI should be less than $75,000.
• Partial tax credits may be available for married couples with MAGI incomes over $150,000 but under $170,000, and single filers with incomes over $75,000 but under $95,000.
• If married couples file separately, they can both claim 5 percent of the home purchase ($4,000 each for a home over $80,000) on their tax returns.
• It’s a tax credit, not a deduction. That means the entire amount goes back to the first-time homebuyer unlike deductions, such as mortgage interest, that are subtracted from gross income before tax is calculated. If qualified for $8,000, the buyer gets $8,000, even if they would not owe that much in taxes otherwise.
• The tax credit applies to homes purchased from Jan. 1, 2009, through Nov. 30, 2009.
• The tax credit does not have to be paid back, providing the homebuyer keeps the property for at least 36 months and resides in the home.
• To qualify as a first-time homebuyer, the purchaser cannot have owned a home within the previous three-year period. However, ownership of a vacation home or rental home does not disqualify the buyer.
• If purchasing a new home, the effective date to receive the credit is the first day the homeowner actually lives in the house. If construction began in 2008, that buyer could still qualify. And if construction begins in 2009 but the owner does not take possession until 2010, the buyer would not qualify.
• The tax credit can be claimed on 2008 income tax forms even though the purchase took place in 2009. A buyer could close on a home the same day that President Obama signs it into law, fill out their income tax forms the next day, and receive the tax credit fairly quickly.
The tax credit is not a downpayment, but it could be used toward a downpayment if first-time homebuyers plan ahead. U.S. taxpayers have money withheld from every paycheck for income taxes. If they owe more tax than the amount deducted, they pay the IRS; if they owe less, they get a tax refund.
By anticipating at least an $8,000 refund in early 2010 when they file 2009 taxes, these buyers could cut down on their tax withholding this year and save the money toward a downpayment. There is one caveat, however: Should they not buy a home in the qualifying period, they would still owe the IRS the money, and reducing their withholding amount could result in a high bill at tax time.
Questions? Call Team Bizzy Bodies at 850-543-4604, 850-865-8548 or 850-420-5544.
© 2009 FLORIDA ASSOCIATION OF REALTORS®
Cynthia Shelton, 2009 Florida Realtors® president, shares the great news about the newly extended and expanded homebuyers tax-credit program.
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