2009 Federal Housing Tax Credit for Home Buyers

There are some perks for home buyers in the new Federal Stimulus package signed by President Obama a few days ago. Details are still a bit sketchy however in broad outline here are some basics that may help you in your home purchase planning.

What is it? A Federal income tax credit applicable directly against your tax liability not subject to future payback, unless home is sold within 3 years. (This “no-payback” provision is different from last year’s tax credit which must be paid back over 15 years starting two years after purchase.)

How much is it? 10% of the home purchase price up to an $8,000 credit.

Who qualifies for it? First-time home buyers buying a principal residence. (Buyers who have not owned a home for 3 years qualify as first-time homebuyers.) Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

When is qualifying period? Home purchases made from January 1, 2009 to December 1, 2009 qualify for this benefit.

This information has been gathered from a variety of sources and I believe it to be accurate. However, in the fullness of time there will be other variables and interpretive nuances coming to light. Be smart. Use this information for planning purposes but before committing actual financial resources consult a competent tax professional for details about how this program will impact your tax liability.

More information may be found here and here.

Revised (improved) $7,500 tax credit for home buyers progressing through Congress

The U.S. House of Representatives has now (January 28, 2009) passed the Economic Stimulus Bill which includes the provision removing the “pay back” aspect of the $7,500 tax credit for first time home buyers according to this CNN report (http://tinyurl.com/c6wn7k). The Senate is expected to pass its own version of the bill in the next week or so. 

This dramatically strengthens the incentive for qualifying buyers (first-time home buyers or those who haven’t owned a home in 3 years) considering the purchase of a principal residence in the near future. The removal of the pay-back provision (contained in both versions) apparently contains the caveat that you must not sell the home within 36 months. 

At the moment a purchase between April 9, 2008 and June 30, 2009 (dates established by the 2008 Housing Recovery Act passed last summer) would seem to safely qualify for the credit. The qualifying dates during which the purchase must be made seem to keep changing. (The Senate version of the bill extends the eligibility through the end of August 2009.) So be sure to check with your tax professional for exact details. The credit may be applied to your 2008 taxes if you purchased in 2008. 

There has been some talk of expanding the credit to other than first-time buyers but to date nothing solid has been proposed. Stay tuned. This is a very fluid situation. I’ll do my best to keep you updated.

$7500 Home Buyer Tax Credit Repayment Requirement Ending?

With the change in the Federal administration has come hope that the $7,500 first-time home buyer tax credit—discussed in my last two posts—may have its 15-year repayment requirement removed.

 Kenneth Harney wrote in yesterday’s Sunday Columbus Dispatch that Congress is seriously considering the move.

 That would substantially increase the attractiveness of the tax credit and will likely boost home buyer interest in the next few months.

 Should you give the $7,500 home-buyer tax credit a second look?

Now that Congress might be on the verge of transforming it into a true tax credit — one that never has to be paid back — you just might want to do so.

 On Jan. 15, the House Democratic leadership outlined its $825 billion economic stimulus package, loaded with $275 billion in tax cuts and $550 billion in new spending on health care, education, alternative energy and infrastructure improvements.

 Tucked away in the tax section was a significant improvement to July’s congressional effort to stimulate home sales.

 That program offered a credit of up to $7,500 to purchasers who had never bought a house or hadn’t owned one during the previous three years.

 To qualify, taxpayers would need to close on a house between April 8, 2008, and July 1, 2009.

 But relatively few consumers were attracted to the plan because, unlike virtually all other federal tax credits, this one had to be repaid in full during a 15-year period.

 In effect, the $7,500 was more like an interest-free installment loan from the government than a straightforward dollar-for-dollar reduction on buyers’ tax bills.

 You can find the complete article here: http://tinyurl.com/harney

New home buyer $7,500 tax credit–REVISITED

A clarification.

I recently wrote about the new federal income tax credit for home buyers.

My statement in that post that singles would receive $3,750 instead of the $7,500 was unintentionally misleading.

Singles buying a home and qualifying in every other way will receive the full $7,500 credit.

Unmarried couples (or married couples who file their taxes separately) who qualify for the full credit will receive a total tax credit of $7,500. Please consult your tax professional for more details about how that credit may be distributed.

More Information from NAR and IRS

The National Association of Realtors (NAR) has posted a website with more information. Find answers to FAQs here. (Short attention span summary.)

Since my original post, the IRS has published detailed answers to FAQs here.

Rain Gardens are cool! Learn more at the CORGI Workshop

Here’s a “green initiative” you probably haven’t thought of. Lighten the load on our storm sewer system and redirect your rainwater runoff into a rain garden. 

The City of Columbus in association with the Central Ohio Rain Garden Initiative is conducting a Workshop and Training at the Department of Transportation, 1980 W. Broad Street this month. The homeowner training will be Tuesday, October 21, 2008. Go to Franklin County Soil and Water Conservation District website for more information.  

http://tinyurl.com/raingarden 

A rain garden will keep your plants and trees healthier, return rainwater to the local aquifer instead of carrying it off miles away from you, reduce the need for sprinkling, and as a bonus provide new visual appeal in your yard as well as a nice natural area that will attract wildlife-the good kind.

There are two sessions for homeowners. The morning session (8:00 am – 12:00 pm) will introduce you to the purpose, design, function and implementation of rain gardens. Breakfast and lunch are both included. Cost: $30. 

The afternoon session (1:00 pm – 4:30 pm) is a hands-on workshop participating in an installation at the ODOT site. Cost $20.

Fundamental Real Estate Mistakes: Self-deception

Self-deception affects everyone to some degree. Lives are lost and incredible amounts of time, money and resources are wasted each day because of it. Knowledge and disciplined vigilance are useful tools against it. So is hiring a professional. 

In real estate the financial impact of self-deception can be enormous. The right real estate professional will employ his or her expertise and objectivity in your service to guide you away from making fundamental mistakes caused by self-deception. 

Author and blogger Dan Ariely, the James B. Duke Professor of Behavioral Economics at Duke University, brings to light one sort of real estate self-deception in this recent blog post at Predictably Irrational. 

A recent study conducted by Zillow finds what they call a “Not My House! Sentiment,” where despite the evidence that 77% of U.S. homes actually declined in value in the past year, 62% of homeowners believe their own home’s value has increased or stayed the same… – Dan Ariely

We’ve encountered home sellers who seemed to feel that their home was worth more simply because they lived in it. It’s hard to beat that for self-deception!

Happy IN your home

I help people buy new homes for their families. I saw a quotation a couple days ago that reminded me of why I do what I do. The quote by G.K. Chesterton was posted on Gretchen Rubin’s blog, The Happiness Project. Here’s the quote. 

“There are no chains of houses; there are no crowds of men. The colossal diagram of streets and houses is an illusion, the opium dream of a speculative builder. Each of these men is supremely solitary and supremely important to himself. Each of these houses stands in the centre of the world. There is no single house of all those millions which has not seemed to someone at some time the heart of all things and the end of travel.” –G. K. Chesterton

Of course I want you to be happy with your home. But I want more for you. I want you to be happy in your home.

Stay in touch. Ask me questions. Request information. Tell me about big, transitional events in your life—your son’s graduation, your daughter’s big victory, your once-in-a-lifetime vacation.

I got to know you pretty well when we bought your home together. I’m still interested. Let me know how you are doing.

Your home is important. I think this song by Cathy Fink captures it. 

HOME by Cathy Fink 

Home

Everyone needs a place that they like to call home

There’s a sweet melody that embraces your heart

And waltzes you back to your home

A long day at work

A long day at play

A place you feel safe at the end of the day

Home

There are places to go and people to see

Adventures to travel we know

A world full of wonder awaits you and me

But nothing quite calls me like home

A bird in its nest

A whale out at sea

There’s a place in this world that’s just right for me

Home

There’s a home that I live in where soup’s on the stove

And my key’s the right fit for the door

But wherever I travel, wherever I roam

My heart keeps the beat of my home

A long day at work

A long day at play

A place you feel safe at the end of the day

Home

 

Copyright 2000, Cathy Fink,

Used with Permission

From the CD: “All Wound Up”, Cathy Fink & Marcy Marxer & Brave Combo

http://www.cathymarcy.com/

NEW federal tax credit for home buyers

Last week, Congress passed a new comprehensive housing bill. Among its components is a significant tax credit available to new home buyers. Kenneth Harney’s “The Nation’s Housing” column in The Columbus Sunday Dispatch, August 3, 2008, does a good job of describing the basics of this benefit for new home buyers.

Michelle Singletary’s July 31, 2008 “The Color of Money” column at WashingtonPost.com (requires free registration to access) provides additional analysis. 

“A tax credit is much more valuable than a deduction. A credit reduces dollar for dollar the amount of tax you owe. A deduction merely reduces the amount of your income that is taxable.” – Michelle Singletary

 For those with a short attention span, here are some important elements.

 Eligibility

• Must purchase between April 9, 2008 and June 30, 2009.
• Must be new home owner (first home purchase or haven’t owned a home in the past three years).

 Benefit

• Up to $7,500 tax credit ($3,750 for singles each for married couples filing separately) that can be applied against 2008 or 2009 federal income tax (technically, 10% of purchase price with a maximum credit of $7,500).
• Reduced benefit for those with adjusted gross income greater than $150K ($75K for singles).
• If your tax liability is less than the credit, the remaining credit will become a tax refund to you.

 Strings

• Home must be your principal residence.
• The credit must be repaid starting the second tax year after purchase.
• Up to 15 years to repay-no interest charged (a full $7,500 credit would require a $500 a year repayment-about $41.67 per month).
• If you resell before fully paying off the credit, you won’t have to pay more than any net gain you make from the sale.

 More Information

• The National Association for Homebuilders is hosting an informative and consumer-friendly Web site with even more details.

Mortgage Insurance? What’s that?

My colleague, Mike Marshall (aka Home Buyer Advocate Mike) has written about the mortgage insurance tax break extension in his blog. He includes some links and a video with excellent background information. Worth checking out.

Will the REAL exclusive buyer agent take one step forward? Not so fast there Mr. Trad.

Not long ago our good friend Jon Boyd posted this useful definition of a true exclusive buyer agent (EBA) on one of his blogs.

Home buyers seeking the best home at the best price and the best terms and who want to make the best use of their time, energy and money in the process should pay close attention to the subtle, but critical, distinctions between EBAs and our trad* brothers and sisters.

A genuine exclusive buyer agent offers home buyers an authentically better alternative to conflict-of-interest challenged traditional real estate practitioners.

[*"Trad" here refers to traditional real estate brokers and agents whose companies represent both buyers and sellers--sometimes in the same transaction. (It's a nickname--not a pejorative.)]

In Ohio, if the BROKERAGE lists homes (represents home sellers), then neither the broker nor any of his or her agents can honestly call himself or herself an exclusive buyer agent.