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7 Weeks Remain To Find A Home, Claim Up To $8,000 In Tax Credits

On March 9, 2010, in Mortgage Programs & News, by admin | Comments

7 weeks remain for the Home Buyer Tax Credit ExpirationIn November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.

To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which the seller is a majority owner
  • You can’t acquire the home by gift or inheritance
  • Each buyer in the purchase must meet eligibility requirements

There’s other criteria, too.

For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.

And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction.  This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.

If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase.  You may find sellers more willing to negotiate today than several weeks from now.

Now is a great time to buy a home in Tucson, AZ!

There’s 100 Days Left To Claim The Homebuyer Tax Credit

On January 20, 2010, in Uncategorized, by Tyler Ford | Comments

100 days remain for the Home Buyer Tax Credit ExpirationNovember 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program.  There’s 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers in Tucson to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, “move-up” buyers were also added to the program’s eligibility list meaning you don’t have to be a first-time home buyer to be eligible for the tax credit.  If you’ve lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

The tax credit’s basic eligibility requirements remain the same:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which they’re a majority owner
  • You can’t acquire the home by gift or inheritance
  • All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however.

First, the subject property’s sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible.  And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

    And lastly, don’t forget that the program is a true tax credit — not a deduction.  This means that a tax filer who’s eligible for the full $8,00 credit and whose “normal” tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

    The complete list of qualifying criteria is posted on the IRS website.  Review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

    There’s just 100 days to go.

    From The IRS : The First-Time Homebuyer Tucson Credit Form

    On March 4, 2009, in Mortgage Programs & News, by admin | Comments

    IRS Form 5405 -- Homebuyer Tax CreditAs part of the American Recovery and Reinvestment Act of 2009, the IRS has officially released Form 5405 – better known as the First-Time Homebuyer Tucson Credit Form.

    True to tax code standards, the 10-field form is accompanied by 3 pages of instructions.

    Form 5405 is a helpful, go-to resource for home buyers with questions about the tax credit.

    For example, the form distinguishes tax consequences for homes bought in 2008 versus 2009, and clearly defines the term “first-time home buyer”.

    In addition, Form 5405 highlights the math behind the tax credit.  In general, the First-Time Homebuyer Credit is equal to the lesser of:

    • $8,000 for homes bought in 2009
    • 10 percent of the home’s purchase price

    Married couples filing separately are entitled to half of the expected credit, and homes sold within 3 years are subject to a credit repayment in the year the home ceases to be the “main home”.

    Form 5405 is a comprehensive reference.  However, be sure to check with your accountant for specific questions about your personal returns and how the First-Time Homebuyer Credit may impact your finances.  There is no substitute for professional, paid advice.

    When Is A 5.000 Percent Mortgage Rate Really 3.600 Percent?

    On January 14, 2009, in Mortgage Educational Information, by Tyler Ford | Comments
    Mortgage interest may be tax-deductible

    An oft-touted benefit of homeownership is its tax benefits.  However, like most IRS-related items, understanding how the benefits work is not always clear.

    In general, homeowners are entitled to two home-related tax deductions — one for annual mortgage interest paid, and one for real estate tax bills paid.

    Not everyone is eligible, though.  Some of the exclusionary traits include total amount borrowed, and whether or not the home is a primary or secondary residence.

    The official IRS publication is filled with notes and explanations but, in general, you can calculate your approximate mortgage interest tax deduction using the following math:

    1. Sum your annual mortgage interest and real estate taxes paid
    2. Find your tax rate on the IRS tax bracket schedule
    3. Multiple your tax rate by the sum from Step 1

    This is grossly simplified, but fairly accurate.

    As an example, a homeowner paying a combined $20,000 in 2008 mortgage interest and real estate taxes, and who is in the 28% tax bracket, may be due $5,600 in tax credits.

    The availability of mortgage interest tax deductions is one reason why loan officers make reference to “after-tax mortgage rates”.  An after-tax mortgage rate is effective interest rate, post-tax code, and can be calculated using the formula below:

    (After-Tax Mortgage Rate) = (Mortgage Rate) * (1 – Marginal Tax Rate)

    The same homeowner with a 5.000% mortgage rate, therefore, has an after-tax mortgage rate of 3.600%.

    Because not every homeowner is eligible for home-related deductions, and because not every homeowner should claim them, talk with your personal accountant before making any tax-related decisions.

    The Pros and Cons Of Making A 401(k) Hardship Withdrawal

    On October 2, 2008, in Mortgage Educational Information, by Tyler Ford | Comments

    401(k) loans should only be made with careful considerationAs household budgets get pinched and credit markets tighten, a growing number of Americans are making “hardship withdrawals” from their 401(k) plans. 

    One major fund group cites a 15 percent increase in activity from this time last year for various reasons including staving off foreclosure and medical emergency.

    However, 401(k) loans should only be made with careful consideration.

    On the positive side, 401(k) loans don’t require a credit check.  This is helpful feature for people deep in debt, and who may have missed a payment or two to their creditors.  With no credit score requirement, a poor payment history won’t disqualify a plan participant.

    In addition, most 401(k) loans can be arranged with just a phone call and a small stack of paperwork.  There’s no “qualification process” like applying for a credit card or a mortgage.  Money can be available, therefore, in as little as a day.

    But there are negatives to 401(k) loans and the biggest one relates to taxation. 

    If you take a 401(k) loan and can’t repay according to its terms, the IRS taxes the loan as ordinary income and slaps on a 10 percent penalty if you’re under 59 1/2.  That can be very costly for a lot of people. 

    But, even if you do repay the loan on time, it’s still gets expensive.  This is because 401(k) loan repayments are subject to double-taxation. 

    The first taxation occurs when the loan is repaid because the payback is made with post-tax paycheck dollars.  A person in the 25% tax bracket, for example, would need a $1,333 paycheck to repay a $1,000 loan — the missing $333 goes to taxes.

    And the second taxation occurs at retirement when the funds are finally withdrawn.  The IRS taxes that money as ordinary income.

    If you're planning to withdraw from your 401(k) for hardship, consider the tax implicationsNow, this isn’t to say that taking a loan against your 401(k) is bad, it just may not be the best possible route for a person in trouble.  Especially because of the costs.  If you’re planning to withdraw from your 401(k) for hardship, be sure to talk with a qualified financial professional first. 

    If you’d like a referral to a trusted professional, give Tyler Ford and Todd Abelson a call at 520-331-LEND.

    Recent Comments

    • Tyler Ford: Great job Todd!
    • Tyler Ford: Seems as through the real estate market is picking up and home prices are stabilizing.
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