principal residence
American Recovery/Reinvestment Act of 2008
April 23, 2009 by Jim Bigelow · Leave a Comment
American Recovery/Reinvestment Act of 2008
First time home buyers purchasing any kind of home, new or resale are eligible for the tax credit. To qualify a home purchase must occur on or after January 1, 2009 and December 2009. The purchase date is when closing occurs, and the title to the property transfers to the new home owner.
For married tax payers, this law test the home ownership of the buyer and his/her spouse. For example: if you have not owned a home in the last three years, but your spouse owned a principal residence, neither you or your spouse qualifies for the tax credit.
However, unmarried joint purchasers can allocate the credit amount to any buyer who qualifies as a first time home buyer.
Ownership of a vacation home or rental property does not qualify as a first time home buyer.
The tax credit is equal to 10 percent of the purchase price up to a maximum of $8,000 dollars.
The income limits for single tax payers is $75,000 and the limit for married tax payers is $150,000 filing a joint return.
This tax credit does not have to be repaid. You claim the tax credit on your Federal Income Tax return. Home buyers should complete IRS Form 5405 to determine their tax credit amount, and claim this amount on line 69 of their 1040 income tax return. No other forms or applications are required, and no approval is necessary.
Any home that will be used as a principal residence will qualify for the credit. The tax credit is refundable, which involves the government sending the tax payer a check for a portion or maybe all of the refundable tax credit.
For qualified veterans 100 percent financing is available through VA Guaranteed Loan Program. Veterans with 100 percent disabilities, certified by the Veterans Administration as service connected are eligible for property exempt status in the State of Oklahoma.
As a military retiree, dedicated to the military personnel and their families, I urge you to contact Coleman White@Jimbigelow.com for all your real estate needs.
Coleman White 918-760-1317
coleman@jimbigelow.com www.jimbigelow.com
Jim Bigelow Bigelow Group Realtors 918-640-4657
www.jimbigelow.com jim@jimbigelow.com
Coldwell Banker Select
principal residence
Homebuyer tax credit for 2009:
March 2, 2009 by Jim Bigelow · Leave a Comment
Homebuyer tax credit for 2009:
Last week I presented a shorter version of the points of the tax credit…after many phone calls, here is some more detail for you:
1. Who is eligible to claim the tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
3. How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
4. Are there any income limits for claiming the tax credit?
The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
9. How do I claim the tax credit? Do I need to complete a form or application?
Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.
10. What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.
In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.
16. I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
18. I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit.
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.
Yes. The law allows taxpayers to choose (”elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
21. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
Source: National Association of Homebuilders NAHB website
Link: http://www.federalhousingtaxcredit.com/2009/faq.php#1
Disclaimer – This information is for general purposes only and you should seek professionals in buying a home. The federal tax credit or other tax benefits information should be reviewed with your accountant or other professionals. The information is presented with no guarantee of the total or correct information on the subject
Steve Bell
Mortgage Consultant
Capital Mortgage Corporation
9014 S Yale Avenue
Tulsa, OK 74137
918-633-8909 Cell
918-481-8810 Office
918-481-8832 Fax
Jim Bigelow 918-640-4657
www.jimbigelow.com jim@jimbigelow.com
principal residence
2 23 2009 Mortgage Monday
February 23, 2009 by Jim Bigelow · Leave a Comment
2 23 2009 Mortgage Monday
Rates were fairly steady last week in the range of 5% + for a 30 year fixed rate, mid 4’s% + for a 15 year at zero discount points and 1% origination fee…a bit higher for zero origination…or lower with some discount points…your choice as to what makes sense for your particular situation. The rates are still very close to historical lows.
Bullet points on the tax credit from the stimulus bill:
- First time homebuyer: defined as someone who has not owned a principal residence during the 3 year period prior to the purchase of a new or resale home.
- For the tax credit, the purchase closing (and title transfer and occupancy) must occur on or after January 1, 2009 and before December 1, 2009.
- The tax credit is equal to 10% of the home’s purchase price up to a maximum of $8,000
- Tax credit is reduced for “modified” adjusted gross income of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint tax return. The tax credit is zero for taxpayers with MAGI above $95,000 (single) and $170,000 (married).
- This tax credit does not have to be repaid. The previous $7,500 tax credit, enacted in 2008 and which is replaced by this tax credit, had to be repaid and was essentially an interest-free loan. You must use the property as your principal residence for at least 3 years or you will be subject to recapture of the tax credit amount (with some exceptions).
- You claim the tax credit on your federal income tax return, completing IRS Form 5405 to determine the tax credit amount, and then claim the amount on Line 69 of the 1040 tax return.
- Any home that will be used as a principal residence will qualify: single family detached, condominiums, townhomes, manufactured homes and houseboats.
- The tax credit is refundable. Simply, if you qualify for a credit, say $8,000, that is more than what you owe in taxes, say $1,000, when you file your taxes, you will receive a check…in this case for $7,000.
- There are some other points to the tax credit that might fit a few buyers particular situation.
Combine the low interest rates with the tax credit, and, as we have been saying:
It’s a great time to buy…or to refinance. Give me a call for a free consultation.
Steve Bell
Mortgage Consultant
Capital Mortgage Corporation
9014 S Yale Avenue
Tulsa, OK 74137
918-633-8909 Cell
918-481-8810 Office
918-481-8832 Fax
Jim Bigelow 918-640-4657
www.jimbigelow.com jim@jimbigelow.com
Coldwell Banker Select
principal residence
Stimulus Package – Tax Credit
February 18, 2009 by Jim Bigelow · Leave a Comment
Stimulus Package – Tax Credit
As you probably know, the House and Senate passed the stimulus package known as the “American Recovery and Reinvestment Act of 2009″ and now it just awaits the President’s signature.
One of the key provisions was a tax credit for 1st time homebuyers – here is what we know, further details or requirements may follow:
*1st time homebuyers only (must not have owned home as principal residence in 3 years prior to purchase date)
*Credit up to $8,000 (up to 10% of purchase price)
*Credit is “refundable,” meaning if your tax liability is less than the credit, you get money back.
*Credit does not have to be paid back if the buyer stays in home 3 years. (if home is sold before 3 years, the credit is recaptured)
*Good for purchases from Jan, 1, 2009 to Nov. 30, 2009
*Eligible for single filers with $75,000 modified adjusted gross income or less ($150,000 for joint filers)…phases out after those amounts up to $95,000 for single filers and $170,000 for joint filers.
What does this mean to you? Buyers now have more money to purchase a home and make update or improvements to their home.
Call me today and let’s discuss how this helps you market and sell your home. You may reach me at (918)640-4657, Email me at Jim@jimbigelow.com or visit my website www.jimbigelow.com.
Jim Bigelow 918-640-4657
www.jimbigelow.com jim@jimbigelow.com
Coldwell Banker Select
principal residence
Understanding Capital Gains in Real Estate
January 21, 2009 by Jim Bigelow · Leave a Comment
Understanding Capital Gains in Real Estate
When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:
1. Purchase price: _______________________
The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.
2. Total adjustments: _______________________
To calculate this, add the following:
• Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
• Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
• Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
3. Your home’s adjusted cost basis: _______________________
The total of your purchase price and adjustments is the adjusted cost basis of your home.
4. Your capital gain: _______________________
Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.
A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:
• You have lived in the home as your principal residence for two out of the last five years.
• You have not sold or exchanged another home during the two years preceding the sale.
• You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.
Jim Bigelow 918-640-4657
www.jimbigelow.com jim@jimbigelow.com
Coldwell Banker Select
