IRS Homebuyer Credit Now Available for homeowners buying a replacement principal residence
Homebuyer Credit Now Available for homeowners buying a replacement principal residence
The Popular Government’s First-Time Homebuyer Credit, which is credited for much of the housing recovery, is now available for long-time homeowners buying a replacement principal residence, making it ideal for coastal transplants and retirees.
[See http://www.irs.gov/newsroom/article/0,,id=204671,00.html for details]
"This could get a lot of the home buyers who have been waiting for just the right time to make a move." - says Alice Donahue, South Padre Island's Leading Broker.
Indeed, low interest rates, increasing home values, deals & incentives on new homes, an improving coastal look, and many more reasons make this an ideal time to buy on the Texas coast.
We have a fantastic array of home products available on the Texas coast from high-rises to condos to beach mansions to new urbanism resort destinations.
There are a few new projects that got in trouble during the recession and those projects carry more risk, while others proved their value even during the recession, make sure you get with a trusted Realtor in your market to find out which ones those are.
In particular, we favor the new-urbanism communities on South Padre and Port Aransas that bring a new level of quality, easy living, aging-in-place, storm resistance, energy efficiency, green living, more things-to-do and an increased potential for appreciation.
Contact us for a free-no-obligation top picks list and/or evaluation of any potential purchase you may be considering on the Texas coast and how the tax credit could provide you the best buying opportunity this century.
- These are The Shores on South Padre and Cinnamon Shore on Port Aransas. Both of these new developments continued to prosper even during the recession and are transforming the Texas coast with new resort destinations.
- While Galveston suffered from both the recession and Hurricane Ike, one project stood out - offering extraordinary value from a significant capital investment to re-create the project while keeping the same prices, this project also continued to do well despite all the local the market issues. The Dawn Beach condos.
The New IRS First-Time Homebuyer Credit
Updated Nov. 17, 2009 - New Legislation
New legislation, 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:
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.
- * 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.
- 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 uniformed services, members of the Foreign Service and employees of the intelligence community serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit.
- * 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.
Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:
- * Applies only to homes used as a taxpayer's principal residence.
- * Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
- * Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
The credit is claimed using Form 5405, which you file with your original or amended tax return.
Check out our market stats for recovery data on the Texas coast.Read about South Padre Island's remarkable recovery stats
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Comment By SmartMoney
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Comment By Michelle Singletary at The Washington Post
10 Things to Know
On Nov. 6, the president signed the new Worker, Homeownership, and Business Assistance Act of 2009 into law.
The centerpiece of this legislation is the extension and liberalization of what is now inaccurately called the first-time home buyer credit.
Here are the 10 most important things to know about the revamped credit.
1. New purchase deadline extends into 2010
The home buyer credit was previously scheduled to expire on Nov. 30, 2009. The new law extends the deal to cover purchases of U.S. principal residences that close by April 30, 2010. However, if a home is under contract on that date, the deadline for closing is extended to June 30, 2010.
2. Existing homeowners can now qualify
The new law allows a reduced credit for existing homeowners who buy a replacement U.S. principal residence after Nov. 6, 2009. The credit equals the lesser of: (1) $6,500, or (2) 10% of the price of the replacement home, or (3) $3,250 for a buyer who uses married filing separate status. The new existing-homeowner credit is only available for purchases that close after Nov. 6, 2009. To qualify, the buyer must have owned and used the same home as a principal residence for at least five consecutive years during the eight-year period ending on the purchase date for the replacement principal residence. If you’re married, your spouse must pass this test too (whether or not you file jointly).
3. Larger credits still allowed for first-time buyers
Before the new law, the home buyer credit was only available to so-called first-time buyers, which means someone who had not owned a U.S. principal residence during the three-year period ending on the purchase date for a home that will serve as the buyer’s new principal residence. If you’re married, both you and your spouse must pass the three-year test (whether or not you file jointly). These first-time home buyer rules still apply for purposes of claiming a larger credit of up to $8,000. Specifically, the credit for a first-time buyer still equals the lesser of: (1) $8,000, or (2) 10% of the home purchase price, or (3) $4,000 if you use married filing separate status.
4. Higher-income folks can now qualify
The home buyer credit is phased out (reduced or completely eliminated) as income goes up. However, the new law significantly raises the phase-out ranges so that many more higher-income buyers will now qualify.
* For purchases after Nov. 6, 2009, the phase-out range for unmarried individuals and married folks who file separately is between modified adjusted gross income (MAGI) of $125,000 and $145,000 (way up from the old-law range of $75,000-$95,000).
* The phase-out range for married joint filers is now between MAGI of $225,000 and $245,000 (way up from the previous range of $150,000-$170,000).
5. New $800,000 purchase price limit
For purchases after Nov. 6, 2009, the credit can only be claimed for a principal residence that costs $800,000 or less. So if your new home costs $800,001, the credit is completely off limits (but I doubt too many people will feel sorry for you).
6. No more credits for kids or dependents
For purchases after Nov. 6, 2009, the home buyer must be at least 18 years old on the purchase date to qualify for the credit. Also, no credit is allowed for a buyer who can be claimed as a dependent on someone else’s Form 1040 for the year of the purchase. These new rules are intended to shut down the practice of claiming the credit for youngish buyers who really don’t even have incomes of their own (like college students who use money from their parents to buy a pad near campus).
7. New anti-fraud rules
A recent government report said the IRS has already identified over 100,000 returns with potentially fraudulent home buyer credits. This is hardly surprising when the government is willing to give away up to $8,000 in free money to anyone who files a return, even when that person reports no income. Believe it or not, absolutely no documentation was required to claim the credit, until now. For credits claimed on 2009 and 2010 returns, buyers must attach a properly executed real estate settlement sheet to the return. Also, the IRS can now simply disallow credits in fishy circumstances (like when it appears the $8,000 credit is being claimed by someone who already owns a home).
8. Credits can still be claimed on prior-year returns
Under the revamped rules, you can still claim the credit for a 2009 purchase on your 2008 return (although you would now generally have to file an amended return to do so). You can also claim the credit for a 2010 purchase on your 2009 Form 1040. This allows you to cash in on the credit sooner rather than later, and it may also allow you to claim a larger credit if your income in the year of purchase is higher than in the preceding year.
9. Credits must still be repaid in some cases
Under old-law rules for homes purchased between April 9, 2008 and Dec. 31, 2008, buyers are generally required to repay the credit over 15 years. However, this repayment rule is generally eliminated for purchases after 2008. That said, you might still have to repay the credit if you sell your home within three years of the purchase date or stop using it as your principal residence during that period.
10. Special rules for military service members
For military service members on extended duty outside the U.S., the new law lengthens the deadline for closing on home purchases for an extra year, to April 30, 2011 (or June 30, 2011 for homes under contract on April 30, 2011). The new law also waives the credit repayment rules for service members who are forced to move due to receiving new orders. The same special rules apply to members of the foreign service and intelligence communities
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Comment By Source: USA Today, Sandra Block
Congress wanted to give money to people who already owned homes.
A credit of up to $6,500 ($3,250 for a married individual filing separately) is available to current homeowners buying a replacement principal residence.
For homes bought after Nov. 7, the credit phases out for individual taxpayers with modified adjusted gross income between $125,000 and $145,000, or between $225,000 and $245,000 for joint filers.
There is also a limit on how expensive the home can be. You don't qualify for the credit if the purchase price of the principal residence exceeds $800,000.
The credit must be repaid if, within three years of purchase, the home ceases to be your principal residence.
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Comment By Department of Energy
The complexity of new home buyer tax credits leaves potential buyers with many questions. Here are answers to some of the most confusing:
How does a current home owner qualify for the $6,500 credit?
Buyers must have lived in their homes for at least five out of the last eight years. The home they buy must become their primary residence, but buyers don’t have to sell their previous home. They can use the previous home as a rental or a second home and still claim the credit.
Does the new home have to be more expensive than the one the buyer currently owns?
No. It is fine to use it to downsize. If the property sells for more than $800,000, the buyers don’t qualify.
Can buyers who are building a new home claim the credit?
Yes, although the contract must be in place by April 30 and the buyer must move in by July 1.
Can buyers claim the credit if they purchase a home from a relative?
No. The legislation prohibits taxpayers from claiming the credit if the sale is between “related parties,” including parent, grandparent, child, or grandchild.
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Comment By National Association of Home Builders (NAHB)
Get a tax credit for buying energy-efficient items like replacement windows, insulation and water heaters.
The credit is for 30 percent of the purchase price, up to $1,500, and it’s available through 2010.
To make sure your purchase qualifies, check the Department of Energy’s list.
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Comment By Washington Post Writers Group, Kenneth R. Harney
The National Association of Home Builders (NAHB) is spreading the word to consumers about an important new law that extends and expands an attractive tax incentive for potential home buyers.
The Worker, Homeownership, and Business Assistance Act of 2009, signed into law by President Obama on Nov. 6, extends the deadline for the first-time home buyer tax credit and gives a larger group of home buyers the chance to take advantage of this government program.
“The tax credit has already proven to be an effective means of boosting economic activity,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “We hope that the government’s action to enhance it will have the intended additional stimulative effect that will help get housing and the economy back on solid ground.”
The new law extends the $8,000 first-time home buyer credit through April 30, 2010, giving buyers who have signed a sales contract by that deadline until June 30 to close their deal. A new credit of up to $6,500 was created for repeat home buyers who buy a principal residence if they have been residing in the home they currently own (or previously owned) for five consecutive years out of the eight years preceding the purchase of the new home.
“It’s not just a first-time buyer tax credit anymore,” Robson said. “Move-up buyers, move-down buyers, and others who have previously owned a home can now qualify as well. In fact, close to 70 percent of all potential home buyers should now qualify for some form of the credit.”
Income limits for eligible buyers have also been increased to allow more consumers to qualify, particularly those in markets with a higher cost of living. Now single taxpayers with incomes up to $125,000 and married couples earning up to $225,000 may be eligible. Partial credits are available to home buyers who earn up to $20,000 more than the limits.
NAHB estimates that the home buyer tax credit will create 211,000 jobs and generate 180,000 additional home sales in the coming year. It is also expected to generate $9.6 billion in wage income and $6.9 billion in federal, state and local taxes.home-buyers.
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Comment By By Tom_Kelly
The IRS has spelled out guidelines for eligibility for the home buyer credit when co-borrowers purchase a property.
When a home-owning parent of an adult child co-signs for a mortgage and both names appear on the note, the IRS says that under some circumstances, the first-time home buyer can qualify for the whole amount.
The IRS says the parent doesn’t qualify for any portion of the credit, but if the child hasn’t owned a home during the three years preceding the current purchase and can qualify based on income, he or she can be allocated the entire $8,000 credit.
When unmarried individuals co-purchase a home and only one of them is eligible for the credit, then the full $8,000 can be allocated to the eligible buyer.
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Comment By Ashlea Ebeling, Forbes
When President Obama signed into law the Worker, Homeownership and Business Assistance Act of 2009, it extended the $8,000 first-time homebuyer tax credit as well as offering a new tax credit up to $6,500 for current homeowners who buy a new primary residence.
The law also extended the strongest driving force in housing today. How big of a force is it? According to the Internal Revenue Service, more than 1.5 million claims were processed from individuals and families who have purchased a home between January and September 2009, and the National Association of Realtors estimates that some 350,000 of these buyers would not have purchased the home without the tax credit.
In addition, analysts say that more than two-thirds of all current homeowners and nearly all first-time buyers will be eligible for the credit extension.
While there's no doubt that the first-time component will continue to be popular, how many existing homeowners who qualify for the new $6,500 credit will actually use it?
Before we present some basic projections from a professional survey, let's consider some realistic domestic timeframes. Here are the important dates to remember:
Nov. 7, 2009: For current homeowners, the home must be purchased on or after Nov. 7, 2009, to qualify for the credit.
April 30, 2010: Purchase and sales agreements must be dated by all parties with a date on or before Friday, April 30.
June 30, 2010: Purchases must close on or before Wednesday, June 30.
The big question for current homeowners is if the window is wide enough to even consider the incentive. Would you, especially if you had not considered selling your home, now uproot your family for $6,500? Would you even consider the anxiety of marketing your home during the holidays or gambling that an acceptable offer would be signed all around by April 30?
The actual amount of the existing homeowner credit equals the lesser of: (1) $6,500, or (2) 10 percent of the price of the replacement home, or (3) $3,250 for a buyer who uses married-filing-separate status. To qualify, the buyer must have owned and used the same home as a principal residence for at least five consecutive years during the eight-year period ending on the purchase date for the replacement principal residence.
If you're married, your spouse also must pass the consecutive-year test. Homes valued at $800,000 or more do not qualify.
The $6,500 existing homeowner credit is worth only about 2 percent of the average purchase price for current homeowners who want to buy a new home, according to results from the Campbell/Inside Mortgage Finance Monthly Survey of real estate market conditions.
Survey results show that the average price for homes purchased by first-time homebuyers was $186,000 in the third quarter of 2009. In contrast, the average price for current homeowners buying a new principal residence was $309,000.
"On a percentage basis, the effect of the tax credit would be much smaller for current homeowners," observed Thomas Popik, research director for Campbell Surveys. "We estimate that the first-time homebuyer tax credit will result in a 10 percent increase in home sales from March through November of 2009.
"We'd expect the effect of the proposed tax credit for current homeowners to be about half as large -- from December until the tax credit expiration in the spring of next year."
A first-time buyer does not mean a person who has never purchased a home. The IRS defines a first-time buyer as anyone 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 homebuyer 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 would qualify for the first-time homebuyer tax credit. However, spouses could be eligible for the repeat buyers' $6,500 credit.
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. For
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Comment By Realtor.org
New home buyer credit is a boon for boomers and retirees looking to move to the coast.
The original $8,000 credit, which was set to expire Nov. 30, was available only to first-time home buyers and those who hadn't owned a home during the three years prior to closing on a new house.
But the new law adds a $6,500 credit for "longtime residents of the same home," making it a boon for retirees and those nearing retirement who want to trade down to smaller homes or perhaps move to a sunnier locale.
Both the $8,000 and $6,500 versions of the credit are refundable--meaning if you don't owe that much in taxes, you get a check back from Uncle Sam.
It's a windfall for those already set on downsizing. Even if you're not set on downsizing, it's something to consider if you're nearing retirement.
Recent research suggests that the happiest retirees are those who move to new dream homes.
To claim either the $8,000 or $6,500 version of the credit, you must close on a new home, or be locked into a contract to close on one, before May 1, 2010. The closing itself must occur before July 1, 2010.
Some retirees might want to rent out their old homes, but if you take this route, keep track of the rule that allows a taxpayer to exclude $250,000 (or $500,000 per couple) of capital gains from tax when selling a principal residence, provided they've lived in that residence for two of the past five years. This provision generally means that if you have gains in your house, you won't want to rent it out for more than a few years.
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Tax Credit Gets Buyers Off the Fence
The new $6,500 move-up Homebuyer Tax Credit is apparently motivating buyers, according to a Campbell Communications survey of 1,500 real estate practitioners.
Existing home owners accounted for 41 percent of home purchases in November, up from 38 percent in October, the survey found.
“Current home owners jumped at the credit,” says survey research director Thomas Popik.
Existing-home sales are up more than 40% since the end of last year.
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