First Time Home Buyer Tax Credit Extended!

First Time Homebuyer Tax Credit Extended Into 2010! Plus…A New Tax Credit for Certain Existing Home Owners! It’s official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009. In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time. So Who Gets What? The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn. Additionally, the 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. 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. Higher Income Caps in Effect 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. Maximum Purchase Price Qualifying buyers may purchase a property with a maximum sales price of $800,000. First-Time Homebuyer Tax Credit – Frequently Asked Questions Here are answers to some commonly asked questions about the tax credit. 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. What is the tax credit for first-time homebuyers (FTHBs)? 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 the 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 do I claim the credit? For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf). Can you 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. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. Are there other restrictions to taking the credit? Yes. According to the IRS, if any of the following describe your situation, a credit would not be due. You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild. You do not use the home as your principal residence. You sell your home before the end of the year. You are a nonresident alien. You 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.) Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.) You 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, 2009, 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, 2006, through July 1, 2009. Can you buy a home from a step-relative and be eligible for the credit? Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed. Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit? Yes. Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years? No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA. So, get on out there today and start shopping.  There is some great inventory, and many great deals waiting to be purchased. Contact us today to discuss this awesome opportunity further.  kjpremier@atproperties.com

Update on the first time buyer $7500 Tax Credit!

Not only will this change help buyers, but the goal is to stimulate the entire Housing Market!  Buying will occur thus lowering our inventory and selling your house!  This new change effects all buyers, buying a primary residence in the next year!  Not just first time buyers.  This stimulus plan is about to do great things.  See the full article here from the NY Times!

 Last evening the United States Senate unanimously passed a bipartisan amendment, offered by REALTOR® Champions, Senators Johnny Isakson (R-GA) and Joe Lieberman (ID-CT) to the Economic Stimulus Bill creating a $15,000 tax credit to individuals who purchase a home in the next year.

 

 

Specifically, the Isakson-Lieberman amendment to the pending economic stimulus bill would provide a direct tax credit to any homebuyer who purchases any home. The amount of the tax credit would be $15,000 or 10 percent of the purchase price, whichever is less. Purchases must be made within one year of the legislation’s enactment, and the tax credit would not have to be repaid.

 

 

The amendment would allow taxpayers to claim the credit on their 2008 income tax return. It also seeks to prevent misuse by only allowing purchases of a principle residence and by recapturing the credit if the home is sold within two years of purchase. The amendment would sunset the current $7,500 housing tax credit on the date of enactment.

 

 

While the final details of the Stimulus Bill are still being debated, this amendment represents a tremendous step forward in NAR’s efforts to stabilize housing markets around the nation.  Because of the efforts of REALTORS®, we expect the final Economic Stimulus Bill will contain several major housing provisions.  We will continue to update you as the bill progresses through the legislative process.

For answers to your questions or to get started in stimulating the economy, contact us today at kjpremier@atproperties.com.

Why Should you Buy Now?

No one can predict if we have hit “bottom” or when the market will kick back up.  KJ Premier Real Estate is not looking for the “bottom.”  We are helping our clients make sound and well thought out real estate investments.  People seem to think that a “bottom”  will automatically result in an upturn.  This is not so, we should be looking at this more as a stabilization in the real estate market instead of a bottom. With that being said here are 5 reasons why you should buy now.

5 Reasons to buy
1. Prices in the neighborhood you are interested in are relatively stable. Either they are holding their own or increasing, or the pace of decline is slowing significantly. If you have to move and don’t like apartments, the small penalty you pay for missing the bottom may not mean much.

2. You plan to stay in the home for more than five years. If you can stick it out that long before selling, economists say you’ll probably ride out any downturn and come out ahead on price.

3. Your rent rivals a mortgage payment. If you can afford to buy, it can give you one bonus that renting can’t: the mortgage-interest deduction on your taxes.

4. You’ve found the right house in the right area for you. The schools are great. You love the area and know it would be hard to find another house like the one you have your eye on. In a better market, you would most likely have much more competition for that home.

5. You’ve built equity in your house and are moving to a place where homes are cheaper. In your new market, your money will go a lot further.  And if you are buying up, you will inevitably see a bargain right now.

And to reiterate what we are saying, please see this article from this week’s New York Times.  If you wait, you may be kicking yourself when you look back a year from now…

Please keep in mind that Real Estate as a whole is very “local’ and your area’s low does not necessarily mean that it coincides with the country’s low or bottom.  Contact KJ Premier Real Estate Services to help you with all of your Real Estate needs.  kjpremier@atproperties.com.

Who Should Buy in This Type of Market?

There are 3 types people who should buy in this market: renters, investors and those who have to move.

Why Should Renters Buy:  

 Renting is just throwing your money away.  Renters do not get the benefit of reducing their income taxes by deducting items such as property taxes and mortgage interests.  As a renter, you are limited on what changes you can make to your living quarters.  As an owner, you can paint, change light fixtures, garden/landscape, and truly put your very own stamp on your home. You can do whatever you want that makes your home a comfortable place for you and your family. It’s your home, not a temporary place to sleep and eat.  Not to mention that homeowners get the shear satisfaction of knowing that they own a home!

Why Should investors buy?

Simply put investors should buy on the age old motto of, “buy when the market is low, sell when the market is high.”  Trust me the market is low.  Our team have secured some unbelievable deals for our clients.  Not to mention in our opinion, at this time the real estate market is a safer place to have some of your assets verses the stock market.  A client earlier in the Spring bought her daughter a place in the city and did so by liquidating some of her stocks.  By further diversifying her portfolio our client estimates that she saved heself about 75K.

 Do you have to move?

The third category of people who should buy now is someone who has to move.  Did you get a new job, get married or is your family growing?  In these situation it is so important to take a look at the whole picture when you are buying and selling.  Look to make your money up on the buy!  Do not get overwhelmed by the fact that your home is selling for less than you would have liked to see it sell for.  Price your home to sell.  The fact is if you do not sell your home you most likely can not buy another.  Make sure you are the best showing and priced home in your area.  Once you sell, look for your own ”GREAT DEAL.”

One reason not to buy in this market:

 A rule of thumb is that it rarely makes sense to buy if you expect to move within two years. That’s because when you do sell, there are costs associated with selling. We’re not just talking about sales commissions to the buying and selling real estate brokers.  Most owners rely on home appreciation to pay those costs and to provide the down payment and closing costs when they buy their next home. So buying a home when you expect to move before too long is a risk, especially in an uncertain market.

Why Not to Wait to Buy:

Do not think about delaying a purchase because you want to “time the market” to get the very best deal, that is almost impossible to do with precision.  Even if you are in an area with declining market prices, the most knowledgeable experts cannot reliably anticipate the “bottom” of a real estate market. Take advantage of the low interest rates. If you wait, interest rates could be higher. That means your monthly payment could be higher too.  The easiest way to accumulate wealth is through home ownership. Three out of four people have more equity in their home than assets in retirement plans, stocks, mutual funds, and savings. Though no one can guarantee your property will appreciate, over time it generally does. Over the long term, you can generally count on it. In the last five years, the median price of homes all across America has increased in value approximately 10%.  The key is that this statistic is over the past five years. 

Lastly, use a knowledgeable Real Estate team like KJ Premier to help find you your best investment.  If you are in the market to buy, talk to one of KJ Premier’s Experienced Realtors.   They have a network of qualified agents in all areas of the United States.  Ask them what the market is like in your area and they will help you further analyze your particular situation.  Call Wendy at 630.514.6615 or Kelly at 312.656.7521.  You can also email KJ PremIer Real Estate and Home Services at kjpremier@atpropeties.com.

Happy House Hunting!