Tim and Julie Harris, Harris Real Estate University.

First Time Home Buyer Credit

As promised….here are the details for the home buyer tax credit.

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.

In our never ending quest to have the smartest Realtor coaching students..

Here is the info you need for tomorrow’s FREE Event:

EVENT: Super Star Interview
DATE & TIME: Friday, November 6th at 9:00am Pacific
FORMAT: Simulcast! (Attend via Phone or Webcast — it’s your choice)
TO ATTEND THIS EVENT, CLICK THIS LINK NOW…
http://instantTeleseminar.com/?eventid=9768747

…..tomorrow’s Superstar interview will be a real brain stretcher for many of us.

Why?

Well, Jeff Nielson isn’t a Realtor…isn’t even in the real estate business. (matter of fact, he isn’t even American!)

So why did we select Jeff to be a HREU Superstar?

Simple, this guy is wicked smart and he is going to share with you what may be coming next not just for housing but, the entire economy.

In all fairness, some of what he is going to say will seem a little scary..for some of you…a lot scary.

Long time HREU Students have been preparing for this market for years. You can easily find our students because they are the agents who are listing and selling short sales and REOs….in your market, chances are the top agents are HREU Students. Agents who are in many cases doing better in this market…because of this market…than any other time in their careers.

Here is a brief Bio for Jeff:

Jeff Nielson is a Canadian, who studied economics for four years at the University of British Columbia, before going on to earn his law degree at that same institution in 1989.

He began seriously studying theprecious metals sector in the middle of this decade, and subsequently created a web-site – Bullion Bulls Canada - along with two other partners.He is currently the site’s writer and editor.

Their objective is to educate people about precious metals, and the excellent investment opportunities associated with this sector. Along with its focus on precious metals, the site provides extensive, general economic commentary – to explain the strong economic fundamentals which are currently driving this sector.

Welcome to the future…the new American Dream…Home Renter-ship.

Earlier this year we reported that in Florida the FHA was experimenting with a new program whereby the homeowner gives the deed back to the bank,…..then RENTS the house…the very same house they ‘owned’. You read that correctly…the Federal Government is about to become the single biggest single family landlord in the world.

(Of the joys of property management…)

What kind of job will the Fed do as a landlord….will they evict home renters when they are late or don’t pay….who and HOW do they determine what the monthly rent payment will be…what effect will this have on existing landlords now that they have to compete with the government for tenants?

Will this program work…? What do you think?