KansasTaxCredit.com

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Here is an update to the Housing Tax credit which includes Military Housing Credit this time around. Last year we posted the housing bill that was signed into law on July 30th, 2008 on here, and earlier this year we posted the update.  Below you will find the current bill as well as both previous bills at the bottom of this page for those that find it interesting and wanting previous information that may pertain to them. 

 

* If you want tell anyone about this page we have a direct link. Tell them to go to www.KansasTaxCredit.com and this page can be viewed.

 

                 Current Extended Housing Bill November 2009

First-Time Homebuyer Credit: Members of the Military and Certain Other Federal Employees

 

The Worker, Homeownership and Business Assistance Act of 2009, which was signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. The new law:

  • Extends deadlines for purchasing and closing on a home.
  • Authorizes the credit for long-time homeowners buying a replacement principal residence.
  • Raises the income limitations for homeowners claiming the credit.  

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.  

For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived  in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.

People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009.

Several new restrictions apply to homes purchased after Nov. 6, 2009.

  • Purchasers must attach a properly executed settlement statement to their return.
  • No credit is available if the purchase price of the home exceeds $800,000.
  • The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
  • A dependent is not eligible for the credit.
  • The new law gives the IRS broader authority to deny first-time homebuyer credit claims, without having to first audit a taxpayer’s return. Known as math error authority, this authority applies, retroactively, to credits claimed on original and amended 2008 returns, as well as to claims yet to be filed.

Additionally, there are new benefits for members of the military and certain other federal employees:

  • Members of the military and certain other federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit. Thus, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2011. If a binding contract is entered into by that date, the taxpayer has until June 30, 2011, to close on the purchase. Members of the uniformed services, members of the Foreign Service and employees of the intelligence community are eligible for this special rule. It applies to any individual (and, if married, the individual’s spouse) who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
  • In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community. This relief applies where a home is sold or stops being the taxpayer’s principal residence after Dec. 31, 2008, in connection with government orders received by the individual (or the individual’s spouse) for qualified official extended duty service. The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty is any period of extended duty while serving at a place of duty at least 50 miles away from the taxpayer’s principal residence (whether inside or outside the U.S.) or while residing under government orders in government quarters. Extended duty is defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.

                                              Previous Housing Bill February 17, 2009

 

  First-Time Homebuyer Federal Tax Credit

As you may have heard, significant improvements in the temporary First-Time Homebuyer Tax Credit were signed into law on Feb. 17 as part of the American Recovery and Reinvestment Act of 2009 to provide a housing stimulus for first-time home purchases that occur between Jan. 1 and Dec. 1, 2009.

This is even better news for first-time homebuyers than the tax credit announced in April 2008 because not only has the tax credit maximum increased from $7,500 to $8,000 – but more significantly – it does not need to be repaid unless the individual re-sells the home within three years.

There are several notable points about this federal income tax credit that I have bulleted for your convenience so you can easily explain the highlights to potential first-time homebuyers. They are:
• Credit maximum was increased from $7,500 to $8,000. The credit is calculated as 10% of the purchase price. Example: If the purchase price is $70,000, the credit is $7,000.
• Removed the repayment requirement, provided the homebuyer does not resell the home for three years.
• Eligibility remains for first-time homebuyers only. In this case, a first-time homebuyer is defined as an individual who has not owned a primary home at any time during the three years prior to purchase, but who may have done so prior to that time. Although certain income limits do apply, the amount of the credit is the same for all taxpayers, married or single.
• To be eligible for the full tax credit, the homebuyer can have an annual adjusted gross income of no more than $75,000 ($150,000 on a joint return). A homebuyer with an annual adjusted gross income above that level and up to $95,000 ($170,000 on a joint return) is eligible for a reduced tax credit.
• The tax credit can be claimed on one’s individual or joint tax return for the purchase of any single-family home between Jan. 1, 2009 and Dec. 1, 2009. It can be claimed on a 2008 tax return (to be filed by April 15, 2009), an amended 2008 tax return, or a 2009 tax return. Individuals should consult a professional tax advisor for exact tax calculations and timing.

To further assist you in communicating this good news, we have created a Consumer Guide chart that explains these important points. In addition, the National Association of Realtors® has prepared a Major Modifications Chart that brokers/agents can use to understand the improvements made in the tax credit since last April. We also have a PowerPoint presentation summarizing the First-Time Homebuyer Tax Credit for your use during first-time homebuyer seminars in your local market and in individual client meetings. Be sure to note that you are not a tax or legal professional, and of course encourage homebuyers to use their own advisors.

Keep in mind that this tax credit is retroactive. You should reach out to your recent first-time homebuyers who closed on or after Jan. 1, 2009 or are currently under contract to close in the near future. Plus, this is a great opportunity to call your customers and potential buyers and help get this important message out to those who can reap the benefits associated with it.

Thank you for your support.

Sincerely,

Tom Kunz
President & CEO
Century 21 Real Estate LLC

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                                                 Previous Housing Bill July 30th, 2008

On July 30, 2008, H.R. 3221 was signed into law. As part of the housing bill, Congress has created a new, temporary tax credit to provide an incentive to first-time homebuyers who buy their principal residence between April 9, 2008 and July 1, 2009.

What is a tax credit?  It is a dollar-for-dollar reduction is what a taxpayer owes on income taxes. Within certain income guidelines, a “first time homebuyer” can take as a credit against his/her taxes 10% of the qualified home purchase price, up to $7,500. For most first-time homebuyers, this means the tax credit will actually equal $7,500.

What if my tax liability is less than $7,500? The new tax credit is a “refundable” credit. This means that the refundable amount is the difference between the credit amount and the tax liability. So, if you owed $3,000 in taxes, and were entitled to a tax credit of $7,500, you would receive a tax refund of $4,500.00.

Who is a first-time homebuyer? A person (and that person’s spouse) who has not owned a principal residence during the three-year period before the present purchase.

Is this a grant, or a loan? It operates like an interest-free loan. It is to be repaid to the government, without interest, over the 15 years following the year the homeowner takes the tax credit, or until sale of the house, whichever comes first.

What if I have to move and my house doesn’t sell for enough to pay back the tax credit? Well, if there was sufficient profit from the sale of the home, then the remaining amount would be due. If not, then the remaining payback would be forgiven. There is little “downside” to the use of this tax credit.

What is the income limitation? The full amount of the credit is available for individuals with adjusted gross incomes of no more than $75,000 ($150,000 for a joint return). Between that and $95,000 ($170,000 for a joint return), a reduced amount is available. Above those figures, the credit is not available.

If financing is obtained by means of a mortgage revenue bond (i.e., through a tax-exempt bond-related financing program offered by a state or local housing agency), then the purchaser is not eligible for the tax credit.

Remember, before you use the first-time homebuyer tax credit, be sure to consult your tax professional.