On November 6, 2009, President Obama signed a bill to extend the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time.
To learn what the new tax credit means to you and your clients, take a look at the concise overview below.
In addition, we’ve put together a script featuring wording you can cut and paste as needed to beat out your competition by connecting with clients who may be able to benefit from the new plan details!
View the Tax Credit Script Now!
TAX CREDIT OVERVIEW
Who Gets What?
First-Time Homebuyers (FTHBs): 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
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: 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.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
What are the New 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.
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 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.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
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.
How Much are First-Time Homebuyers (FTHB) 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 fort 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 Much are Current Home Owners Eligible to Receive?
The tax credit program includes 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.
Can Homebuyers 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. Some examples of this would include a land contract or a contract for deed.
According to the IRS, factors that would demonstrate the ownership of the property would include:
1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.
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. (Please see the question below for details regarding purchases from “step-relatives.”)
They do not use the home as your 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.)
They 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, 2008, 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, 2005, through July 1, 2008.
Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?
Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.
If a Parent (Who Will Not Live In The Property) Cosigns 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.
Monday, November 9, 2009
Friday, November 6, 2009
Jobless Rate Hits Double Digits!
The results are in. The Labor Department reported today that thre were 190,000 jobs lost in October, higher than the 175,000 job losses that were widely expected, but in line with what we have been saying. And as we have been forecating, the number that has been all over the media this morning is the Unemployment Rate rising to 10.2% - quite a bit higher than the 9.9% expected,and the highest Unemployment level since 1983. While this number is bad, what is even more concerning is the "real" unemployment rate being closer to 17.5%. This includes those who have not searched for a job for at least four weeks, known as "discouraged or detached" workers, as well as those desiring full time work but having to settle for part time, the "underemployed."
The Average Workweek came in at a record low of 33 hours, which highlights the present slow economic demand and underscores the fact mentioned above, that many people are working part-time, but would prefer full time work. Another consideration for the low work week could be productivity gains as well. The only ray of sunshine within this anemic report were the upward revisions for August and September, showing 91,000 fewer jobs lost than previously reported.
Let's remember, in order to just keep up with population growth-or to keep the ranks of the unemployed from rising-there must be 125,000 jobs created each month. So the latest report of 190,000 jobs lost, really means we have fallen behind by 315,000 jobs, just last month. Imagine this...I am a Mississippi State fan and Davis Wade Stadium on the campus of Mississippi State will hold almost 60,000 Bulldog fans. If you could fill Davis Wade Stadium three times with the number of people who lost their jobs last month, you can get an idea of the enormity of this number!
The Homebuyers Tax Credit jumped its last hurdle yesterday, as both the house and Senate have passed the bill and it now awaits the Presidents signature,which is expected today or tomorrow. And while I have been expecting this to happen for some time and have given you many details, let's go over them one more time. For First Time Homebuyers or those who have not owned a home within 3 years, the tax credit remains at $4,000 for singles and $8,000 for couples, with income restrictions maxing out at $125,000 and $225,000 respectively. Current homeowners-those defined as having owned a home for five of the previous eight years-can now also take advantage of a credit, with slightly lesser amounts of $3,250 for singles and $6500 for couples, with the income restrictions the same as described above. To qualify for the new program, purchase agreements need to be signed by April 30th and close by June 30th.
The Average Workweek came in at a record low of 33 hours, which highlights the present slow economic demand and underscores the fact mentioned above, that many people are working part-time, but would prefer full time work. Another consideration for the low work week could be productivity gains as well. The only ray of sunshine within this anemic report were the upward revisions for August and September, showing 91,000 fewer jobs lost than previously reported.
Let's remember, in order to just keep up with population growth-or to keep the ranks of the unemployed from rising-there must be 125,000 jobs created each month. So the latest report of 190,000 jobs lost, really means we have fallen behind by 315,000 jobs, just last month. Imagine this...I am a Mississippi State fan and Davis Wade Stadium on the campus of Mississippi State will hold almost 60,000 Bulldog fans. If you could fill Davis Wade Stadium three times with the number of people who lost their jobs last month, you can get an idea of the enormity of this number!
The Homebuyers Tax Credit jumped its last hurdle yesterday, as both the house and Senate have passed the bill and it now awaits the Presidents signature,which is expected today or tomorrow. And while I have been expecting this to happen for some time and have given you many details, let's go over them one more time. For First Time Homebuyers or those who have not owned a home within 3 years, the tax credit remains at $4,000 for singles and $8,000 for couples, with income restrictions maxing out at $125,000 and $225,000 respectively. Current homeowners-those defined as having owned a home for five of the previous eight years-can now also take advantage of a credit, with slightly lesser amounts of $3,250 for singles and $6500 for couples, with the income restrictions the same as described above. To qualify for the new program, purchase agreements need to be signed by April 30th and close by June 30th.
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