First Time Buyer Tax Credit FAQ's for July 15th 2009

# Who is eligible to claim the tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.

# What is the definition of a first-time home buyer?
The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

# How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

# Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

# What is "modified adjusted gross income"?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.

# If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.

# Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

# How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.

# How do I claim the tax credit? Do I need to complete a form or application?
Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.

# What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

It is important to note that you cannot purchase a home from your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse. Please consult with your tax advisor for more information. Also see IRS Form 5405.

# I read that the tax credit is "refundable." What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

# I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.

# Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

# Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.

# I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.

# I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.

# Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

# I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
# Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 14 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.
# The Secretary of Housing and Urban Development has announced that HUD will allow "monetization" of the tax credit. What does that mean?
It means that HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.

Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.

The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement.

In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.

More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
# If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
# For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Home Sales Rose for a Third Month in May

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By THE ASSOCIATED PRESS
Published: June 23, 2009

WASHINGTON (AP) — A real estate group, the National Association of Realtors, said on Tuesday that sales of previously occupied homes rose modestly from April to May, the third monthly increase this year, but that signs of any housing recovery were fragile at best.
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The New York Times

The Realtors said that home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.77 million last month, from a downwardly revised pace of 4.66 million in April. Prices, meanwhile, were 16.8 percent lower than a year ago.

About one out of every three homes sold was a foreclosure or distressed sale. That helped drag down the median price to $173,000 — 16.8 percent below a year ago. Falling prices coupled with new rules for property appraisers have caused many transactions to fall apart or be delayed.

“We have just been flooded with e-mails, telephone calls on the appraisal problems,” said Lawrence Yun, the Realtors’ chief economist.

The sales results missed economists’ expectations, and stock markets headed lower on the news. Home sales had been expected to rise to an annual pace of 4.81 million units, according to Thomson Reuters.

One bright spot, however, was that the number of unsold homes on the market at the end of May fell 3.5 percent, to nearly 3.8 million. That is a 9.6-month supply at the current sales pace.

That drop was “the best news in the report,” said Joseph LaVorgna, Deutsche Bank’s chief economist.

10585 Gillete NEW Home for sale!

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Constance Ramos is on the show today, and offer these tips for FAUX Painting

Materials and Tools:

paint brush
tire brush
toilet brush
2 empty buckets
dark green paint (Benjamin Moore Brookside Moss, 2145-30)
green metallic paint (Mark's Paints Sage, ME 247)
gold paint (Mark's Paints Iridescent Gold, ME 194)


Steps:

1. Pour the green metallic paint in one bucket and the dark green in another.

2. Mix the paint around with a brush to thin it out, making it more translucent.


Figure A
3. Use the paint brush to add paint to the toilet (figure A) and tire brushes or dip the brushes directly in the paint.


Figure B
4. Paint the wall with the cleaning brushes (figure B). The rough bristles allow you to spread the paint in rough and unpredictable streaks, which gives the wall a distressed quality.

5. Cover the wall with the gold paint to make the wall shine.

First Time Buyer Tax Credit, do you qualify?

1. Eight grand, new buyers: The tax credit included in the economic stimulus legislation is much narrower than the $15,000 proposal. This credit is equivalent to 10 percent of the purchase price of the home--although it's capped at $8,000--and applies only to first-time home buyers and principal residences. But unlike an earlier $7,500 home buyer tax credit, this one does not have to be repaid.

2. First time buyers defined: For the purpose of this legislation, a "first-time home buyer" is someone who hasn't owned a principal residence for three years before buying a house. (The date of purchase is considered the day that the title is transferred.) That means if you've owned a vacation home--but not a principal residence--within the past three years, you would still qualify for the credit.

3. 2009 buyers only: Only those who purchase a home on or after January 1 and before December 1, 2009 are eligible for the credit. Anyone who bought a home last year won't be able to take advantage of it.

4. Income limits: The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less to qualify for the full credit, that's $150,000 for married couples. Those earning more than these thresholds may be eligible for reduced credits.

5. Refundable: Because the tax credit is "refundable," qualified buyers can take advantage of it even if they don't have much tax liability.

6. Recapture: Buyers have to own the home for at least three years in order to capitalize on the credit. If they sell the home before then, they will have to return the credit to the government. (Exceptions will be made in certain cases, such as death or divorce.)

The American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009, the Treasury’s financial stability plan, and other stimulus efforts for families and housing.

The National Association of Realtors® hailed the Senate for passing its stimulus bill that expands the homebuyer tax credit, an important housing component that will help shrink housing inventory, bring stability to home values and move the country closer to an economic recovery.
The bill now heads to conference committee to reconcile differences between the Senate and House versions.

Congressional leaders hope to have the bill ready for President Obama’s signature by the weekend. NAR will continue to press the need for housing stabilization measures with Congress and the Obama administration to make housing a primary component of the government’s economic recovery plans.
Additionally, NAR commended the Obama Administration for the financial stability plan announced today by Treasury Secretary Timothy Geithner.

Geithner stressed the importance of improving the housing market by reducing foreclosures, making credit more available and by bringing mortgage interest rates down.

NAR believes that many of the actions called for in the Treasury plan should result in lower mortgage rates and fewer foreclosures.
About the tax credit, McMillan said, “The credit of up to $15,000 for homebuyers is a critical provision in the Senate bill that will result in approximately 1 million additional home purchases this year,” McMillan said. The provision also eliminates the repayment feature of the earlier tax credit, makes the credit available for all purchases of primary residences and extends the credit for one full year. These are all provisions NAR has continually called for in any federal stimulus plans. Review that…..

“This is a great effort by the Senate and a major step in the right direction, but our work is far from finished. Much more needs to be done in the coming days and weeks to bring stability to the housing market and to begin an economic recovery,” said McMillan. (courtesy of Realtor.org)

The Treasury’s plan anticipates lower interest rates through the ongoing Federal Reserve program to purchase mortgage-backed securities. The Treasury has also agreed to buy commercial MBS, a bold step in helping preserve the commercial real estate sector.

What should I do to prepare to buy a home in 2009?

In 2008 mortgage crisis increased the numbers of foreclosures and short sales in the U.S. Lenders responded by tightening rules for new home loans. If you want to buy a home in 2009, what do you need to know before looking for your home and home loan? What can you do to make yourself a desirable mortgage borrower so that banks will issue you a home loan? Check out these New Year's resolutions for home buyers to improve your changes of getting a great home loan and the property you want.

As we say goodbye to 2008, it's worth looking back at the year that was for home buyers, sellers and homeowners.

Frankly, I wouldn't be surprised if 2008 goes down as one of the worst-ever for housing since the Great Depression.

Housing values fell by double-digits in many metropolitan areas. Housing starts virtually stopped. Inventories of new and existing homes grew dramatically. Mortgage interest rates remained relatively high, even as the short-term Federal Funds rate plunged to nearly zero by the end of December.

Foreclosures reached record numbers, and lenders found themselves literally buried under stacks of short sale proposals, foreclosure filings, and loan modifications. Late in the year, Fannie Mae announced it would stop tossing renters who paid on time out of houses that had been foreclosed upon.

Of those loans that had been modified more than 50 percent went delinquent, reflecting the increasing number of jobs lost and diminished paychecks.

The old lender's maxim holds true: If you don't have a job, you probably won't make your mortgage payment.

Lets talk about Income Affecting your Ability To Make Mortgage Payments

Sometime around the middle of the year, when Fannie Mae and Freddie Mac were taken over by the government, lenders realized that having a real job with a real income is central to assessing someone's ability to make monthly payments of principal, interest, taxes and insurance. Having a great credit score simply isn't a good enough predictor on its own, which is why "no-doc" loans have entirely faded away.

Lenders also rediscovered the beauty of having some skin in the game. Except for the USDA's rural loan program and a VA loan, zero down payment mortgages have virtually dried up.

Sellers aren't happy. But there are plenty of deals to be had, as the economy is expected to get worse at the beginning of 2009. Higher rates of unemployment mean more foreclosures, driving down the price of homes.

As we ended 2007, I wrote that some were comparing the 2007 housing market to the Great Depression. Looking back on this year, most housing markets took a turn for the worst. The silver lining for home buyers: If you're looking to buy a house, 2009 could be a great year to close on a deal.

If you're planning to buy a house this coming year, here's my annual list of New Year's resolutions you should consider making:

Lets talk about your new years resolution to buy a home:

You can say (raise your right hand) As a buyer, I resolve to:

1. Get my credit and finances in shape.

Put a lid on your spending, cut up the cards, and don't max out any one card (in fact, never charge more than 25 percent of your maximum credit limit) or your credit score will suffer. If you're going to cancel an account, do it in writing, but you get bonus points on your credit score the longer you maintain a credit account. So a credit card account that you opened in 1984 is worth a lot more than one you opened last month.

Don't forget that good credit also means job stability. Most lenders require that you work for the same employer for at least a year, and maybe two, before they'll approve your home loan application. If you're self-employed, they'll want to see at least two years of tax returns before you'll qualify for a conventional loan. If you're offered a better job in your field, by all means take it. But if you want to buy a home, try not to jump from job-to-job to job within a relatively short period of time, particularly if the job changes are in different industries.

If you want to buy a house next year, pull a copy of your credit history and credit score. Try to reduce the amount of personal debt you have, including credit card debt, student loans and auto loans. While having personal debt doesn't mean you can't qualify for a loan, it will lower the amount of the mortgage a lender might be willing to give you. And, given the current mortgage crisis, lenders are paying close attention to your credit history and credit score.

If you keep one resolution this year, choose to clean up your credit. One of the best things you can do to prepare for buying a home is to make your monthly debt payments on time. Even if you have a lousy credit history, lenders will be more forgiving if they see you've gotten your act together in the last 6 to 12 months.

Federal law now requires each of the three main credit reporting bureaus (Experian, Equifax and Transunion) to give you a free copy of your credit history once a year.

To get yours, go to www.annualcreditreport.com. At the time, buy a copy of your credit score from Equifax. The cost is under $10, which is still less than other sites.

2. Resolution for buying in 09 is Know how much I can afford to spend before shopping for a home.

You have three options when it comes to figuring out how far your down payment and income will take you: You can guess; or you can pay a visit to your local lender, who will pre-qualify or pre-approve you for a loan, or you can go online.

Your lender will look at your income, debt, assets and liabilities and come up with the maximum amount you can spend on a home. Once you know how much you can afford to spend, you'll avoid making a common, heartbreaking, home buyer error: Looking at homes you can't afford to buy.

Too busy to visit a lender? There are several websites that offer good mortgage information. Try stonegatemtg.com for a state-by-state look at current interest rates from lenders who work in your area, including online lenders.

3. Know your neighborhood, and be comfortable with it, before YOU buy a home there.

Everyone wants to live on the best block in the best neighborhood. Unfortunately, that location may not be in your budget. You might be able to afford the smallest home on the best block, but that won't do you much good if you need four bedrooms and that home only has two. Balancing affordability with location means you will have to compromise. While you may be willing to compromise on the size garden you have, you may not be willing to change your children's school districts.

Start looking at various neighborhoods and the amenities they offer. Is there a park? Shopping? Transportation? A house of worship? Do your friends and family live close by? Be careful not to limit your choice of neighborhoods too early on in the process. Explore new areas and the housing stock and amenities they offer.

Make sure you spend time during different parts of the day and night in the neighborhoods you like. Walk the streets, go into local shops. Visit the neighborhood police department and local schools. Stop by the local park district offices and see what programs and classes are available. Drive the commute from prospective neighborhoods to your job during rush hour. Get to know the neighborhood and its residents inside and out before you buy.

go to my website to look at homes for sale at www.davidvannoyjr.com

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