Archive for April, 2009

New Home Buyer Incentive

Tuesday, April 7th, 2009

New Home Buyer Incentive

There has been quite a bit of information available about the new home buyer tax incentive.  Many trade journals have included a review of the policies and terms. There has been less coverage however, in the main stream media. The issue of whether or not prospective buyers fully understand the tax incentives is not as clear. One of the primary rolls real estate agents play in the transaction is the access to information. Although we encourage buyers to consult with their attorneys or tax advisors, we can provide direction and counsel on some of the basics. We encourage you to know some of the facts.

The 2008 $7,500, repayable credit is increased to $8,000 and the repayment feature is eliminated for 2009 purchases.

Credit applies only to first-time home buyers or non-owners for the last three years.

Every dollar of the tax credit reduces income taxes by a dollar. If the tax obligation is less than $8,000, eligible purchasers would get a refund.

There are income restrictions of $75,000 for individuals and $150,000 for married and filing jointly puchasers.  These levels refer to the Adjusted Gross Income.  There are phased out limits for higher incomes.

Properties have to be a “Principle Residence”. Meaning that, in general, more than 50% of the time must be spent using that residence.

There are no pre-purchase authorizations or applications. The claim for the deduction is simply made on the IRS Form 1040 tax return.

The tax credit cannot be used for a down payment.

Eligible recipients may choose to file an extension until after closing, or amend their filing.  Buyers are advised not to file a return with the credit unless the transaction has already closed.
 

You can learn more about the tax credit by reading some questions and answers posted on the

Association website: www.rascw.org.

 Rock Realty Wisconsin

First time home buyer tax credit modifications

Monday, April 6th, 2009

FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act

Major Modifications Italicized

 FEATURE

CREDIT AS CREATED JULY 2008

APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008

 

 

REVISED CREDIT –

EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009

 

 

Amount of Credit 

 

Lesser of 10 percent of cost of home or $7500 

Maximum credit amount increased to $8000 

 

Eligible Property 

 

Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence. 

No change

All principal residences eligible.

 

Refundable 

 

Yes. Reduces (or can eliminate) income tax liability for the year of purchase. Any unused amount of tax credit refunded to purchaser. 

No change

Purchasers will continue to receive refund for unused amount when tax return is filed.

 

Income Limit 

 

Yes. Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return). Phases out above those caps ($95,000 and $170,000). 

No change

Same income limits continue to apply.

 

First-time Homebuyer Only 

 

Yes. Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase. 

No change

Still available for first-time purchasers only. Three-year rule continues to apply.

 

Revenue Bond Financing 

 

No credit allowed if home financed with state/local bond funding. 

Purchasers who utilize revenue bond financing can use credit. 

 

Repayment 

 

Yes. Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing. 

No repayment for purchases on or after January 1, 2009 and before December 1, 2009 

 

Recapture 

 

If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale. 

If home is sold within three years of purchase, entire amount of credit is recaptured on sale. Applies only to homes purchased in 2009. 

 

Termination 

 

July 1, 2009

(But note program changes for 2009)

 

December 1, 2009 

 

Effective Date 

 

Purchases on or after April 9, 2008 and before January 1, 2009. Repayment to begin for 2010 tax year. 

All revisions are effective as of January 1, 2009