Service Members Get Tax Credit Extension

As you should already know, the $6500/$8000 home buyer tax credit is ready to expire in about four days, potentially taking with it much of the motivation for buying a new home and making a lot of people wonder what the real estate market will look like come May 1st. However, it appears that members of the military may qualify for a one year extension of the credit.

According to the National Association of Home Builders, Congress has granted an extension of the credit to military members who qualify. The following exemptions and definitions apply:

Exemption From Tax Credit Recapture Rules

• Typically, homes that are sold or that cease to be used as a principal residence within three years of the initial purchase are subject to recapture of the tax credit.
• However, qualified service members who sell or move from a tax credit home within three years of the initial purchase due to official extended duty are exempt from the recapture rule.

Extension of Tax Credit Deadlines

• The home buyer tax credit is available for qualified purchases with a binding sales contract in place on or before April 30, 2010 and closed by June 30, 2010.
• However, for qualified service members who are ordered on a period of official extended duty, these dates are extended for one year. For these home buyers, the tax credit applies to sales with a binding sales contract in place on or before April 30, 2011 and closed by June 30, 2011.
• A person who is forced to return to the U.S. for medical reasons before completing an assignment of at least 90 days of qualified official extended duty outside of the United States may qualify for the one-year extension.

Definitions

• “Qualified service member” means a member of the uniformed services of the U.S military, a member of the Foreign Service of the U.S., or an employee of the intelligence community.
• “Official extended duty” means any period of extended duty outside of the United States for at least 90 days during the period beginning after December 31, 2008 and ending before May 1, 2010.

We’re glad to see this extension for our service members and applaud Congress for taking this step.

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

Service Members Get Tax Credit Extension

The End of the Tax Credit…Again.

As you may recall, The Worker, Homeownership, and Business Assistance Act of 2009 extended the $8000 tax credit for first time home buyers and also created a $6500 tax credit for repeat home buyers. Depending on who you talk to, this program has been successful in stimulating home sales during its 5-month run, and also during its prior iterations as a $7,500 credit that had to be repaid, and an $8,000 credit that didn’t and was subsequently extended and expanded to its current form. However, questions were raised as to whether or not the homes that have been purchase during the credit period would have been bought anyway.

Who knows. In our opinion, the tax credits have run their course and outlived their usefulness, but as to whether or not they’ll be extended again…well, as someone said, “there’s nothing more permanent in Washington than a temporary tax credit.”.

Regardless, the time is rapidly approaching for this version of the tax credit to sail off into the sunset, and again, depending on who you talk to, it’s either a good thing or a bad thing. There have been scores of rumors floating around the web as to whether or not the tax credit will be extended, but nobody really knows for sure. There are signs that it may be a decidedly uphill battle for lobbyists to get lawmakers to approve another extension. For one thing, the Senator who spearheaded the effort to get the tax credit extended in the first place, Johnny Isakson (R-GA), has said that there will be no further extensions. His spokesperson stated that part of the benefit of the credit was the need for it to expire. In order to secure another extension then, it would seem that lobbyists would need to find another champion for their cause, which looks unlikely.

In case you’ve forgotten, in order to qualify for the tax credit, you must have a signed sales contract by April 30th, and your closing must take place by June 30th. That critical date, April 30th, is what our countdown clock displayed above is inexorably counting down to. So, if you’re looking to cash in on any of this free money, you’d better hurry – time’s a wastin’.

But wait. Before you run out looking for a deal on the home of your dreams, ask yourself if you’re buying just to get the credit, or are you really, truly ready to buy a home? A hasty decision can result in some particularly painful regrets. Of the 30 year variety. So if you have no need of the tax credit, taking your time to think things through is probably the most prudent course of action.

However, if you’ve thought through your situation, talked it over with all the involved parties, discussed your financial status with your accountant and/or lender, and really, REALLY feel this is the time to buy that first, or next, house, then by all means, go for it. Remember though, although you have a few weeks left on the clock, make sure you leave yourself a window of time to account for the search process, locating a Realtor, making an offer, negotiating that offer, and having it possibly REJECTED, in which case you’d have to start all over. Then the stress factor goes into overdrive.

Either way, Harriman Real Estate is at your service. Call us today at (203) 672-4499 and let us help you find the perfect home for you!

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

The End of the Tax Credit…Again.

Ryan Raveis, Vice President of Sales and Marketing for William Raveis Mortgage, summarizes the new tax credit for home buyers and homeowners including eligibility, income limits, and program specifics.

If you have any questions about the new tax credit, please call The Harriman Team at (203) 672-4499, or email us at realestate@theharrimanteam.com.

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

Home Buyers Tax Credit Video Summary

I know, for the past 48 hours or so you’ve been seeing blogs all across the Interwebs shouting from the rooftops that the $8000 Homebuyer Tax Credit has been extended, expanded, retooled, rebuilt and pretty much made into the Six Million Dollar Man (actually, it’s closer to 10.8 Billion Dollars, man). But, as well-meaning as those eager beavers were…it just wasn’t so.

Yes, the Senate slammed it through in a 98-0 vote on Wednesday, but that didn’t make it a LAW; yes, the House breezed through a 403-12 vote to pass the bill yesterday, but that STILL didn’t make it a LAW. Well, today, after much hand-wringing and teeth-gnashing by Realtors, home buyers, and Republicans everywhere, the President finally signed the Worker, Homeownership, and Business Assistance Act of 2009 into law, and a collective sigh could be heard throughout the Land.

As you probably know, there are some changes to the tax credit that people should be aware of, so without further ado here is what the tax credit looks like in its current form:

• The existing $8,000 tax credit for first time home buyers, which was set to expire on November 30th, is hereby extended to May 1, 2010. The credit is for 10 percent of the home’s purchase price or $8,000, whichever is less.
  
• For current homeowners, the credit is 10 percent of the home’s purchase price or $6,500, whichever is less.
• As a first-time home buyer, you have to either buy a home for the first time or you cannot have owned a primary home within the past three years. First time home buyers filing separate taxes are only eligible for a credit of $4000.
  
• Current homeowners must have lived in their home for at least five consecutive years out of the past eight years in order to qualify for the $6,500 credit. Married homeowners filing taxes separately can only get a credit of $3250.
  
• In order to claim the credit, a home buyer must be in a binding, written contract no later than April 30 1, 2010, and they must close on that contract no later than June 30, 2010. If you sign your contract on may 1st or later, you’re out of luck. Ditto if you close on July 1st or later.
  
• The income limits for the old tax credit were $75,000 for singles and $150,000 for married couples filing jointly. Under the new credit, those limits have been increased to $125,000 for singles and $225,000 for married couples. If you earn more than those amounts, your potential credit will be reduced accordingly. Married couples who earn more than $245,000 are ineligible.
• The maximum purchase price of a primary residence for the purposes of this credit is $800,000. If the home is $800,001, it doesn’t qualify.
• Members of the Armed Forces deployed on duty outside the United States are also eligible for the tax credit; however, they must have been deployed outside the U.S. for at least 90 days between Dec 31, 2008 – May 1, 2010. They have until April 30, 2011 to sign their contract and June 30, 2011 to close the sale.
  
• A Tax Fraud provision has been added to this bill to prevent unscrupulous people from abusing it. There have been many instances of tax fraud surrounding the old tax credit, so in order to claim the new credit you must submit documentation along with their tax return to prove the home was purchased. This would probably be a copy of the HUD-1 Settlement Statement, but you may want to check with your tax advisor to ensure you provide the right documents.
• The credit is NOT retroactive on homes bought prior to the date of enactment of this legislation. There is no “grandfather” clause for the credit.
  
• The credit may be applied to an RV, motor home, or houseboat as long as it it used as a primary residence.

So, I think that about covers everything about the new tax credit. Well, all the important stuff, that is. I could go on for days with the minutiae of the bill, but that would bore you to tears. If you have lots of time on your hands, or you just like subjecting yourself to torture, you can read the technical explanation of the bill here.

The information presented here was obtained from sources deemed to be reliable, including various government sources. However, if you happen to see something here that you feel is inaccurate or misleading, or if we’ve omitted something important, please bring it to our attention so we can research, verify and correct it.

This tax credit is the third in a series of credits designed to stimulate the housing market and, thereby, the economy. Some experts feel it will be the spark the economy needs to begin returning to prosperity again, while others are worried about the cost of the tax credit, not only right now, but also to future generations. In addition, they are not convinced that these tax credits have been instrumental in the rise in home sales over the past few months. The bottom line is this: Don’t let anyone tell you that you need to buy a house NOW because of this tax credit. Do your homework. Take all of your circumstances into account and make the best possible decision for you and your family that you can make before taking the plunge. If after all that, you’re sure it’s time for you to buy, give us a call…we’ll be here to guide you every step of the way!

(Update 11/9/09: These FAQ’s may be of use to you, check them out: Tax Credit FAQ)

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

Surprise! $8000 Homebuyer Tax Credit is Officially Extended and Expanded

The deadline for qualifying for the $8000 tax credit for first time home buyers is rapidly approaching. By “deadline”, I mean both the date the credit actually expires, November 30th, and the date that you should be under contract to buy that new home by, which for all intents and purposes is this Friday, October 16th. Incidentally, there are many who say that you should have been under contract already if you hope you close on your home by November 30th, but since real estate is local and not all circumstances are equal, we’ll go with the 16th, as we outlined in a previous post. (Technically, a near perfect closing, where the buyer pays cash, does no inspections and no unforeseen problems arise in the transaction, COULD take place in 30 days or less, but those are few and far between.)

No News is NOT Good News…

As of this writing, there has been no indication from any source, inside the government or outside, that the tax credit will be extended in one of the currently existing formats: for just first timers or for all buyers; at the current $8000 level or at an expanded $15,000 level; or just for the remainder of the year or for another 3, 6, 9 or 12 months. In fact, there has been much chatter in many circles that the best course of action would be to just let the credit die a quiet death and allow the market to correct itself naturally. So, this tax credit will, at least for the time being, remain in limbo.

(UPDATE 11/6/09: The $8000 Tax Credit appears to be headed for passage, but it has NOT been signed by President Obama yet. He is expected to sign it today and we will be publishing another blog post when this happens to update you on the new terms of the credit.)

Support Our Troops…

There is, however, another tax credit passed through the House of Representatives that will extend the tax credit for American service members. HR 3590, sponsored by Rep. Charles Rangel, D-NY, extends for one year, to December 1, 2010, the deadline for taking advantage of the $8,000 first-time home buyer credit for qualifying service members, so that certain service members stationed overseas can take advantage of the credit when they return home. It would also ensure that service members will not have to repay the first-time home buyer credit if they are ordered to deploy to a different location and, as a result, forced to sell their home within three years of buying it. Additionally, the bill would ensure that certain payments are tax-exempt under the Defense Housing Assistance Program (HAP), which assists military personnel selling a home that has declined in value.

The bill passed unanimously in the House and now goes to the Senate for a vote, where it is expected to pass with ease. So, unless something drastic happens in the Senate, it looks like if you’re in the military you’re golden for at least another year. The rest of you first time home buyers…not so much. Your time is just about up, and unless Congress takes action on one of the existing bills to extend and/or expand the current bill, the housing market may take a noticeable dip over the next few weeks.

Whatever is decided, they need to do it quickly. Keeping everyone in suspense is not likely to do anyone any good.

Related articles by Zemanta

• Is the Impact of the First-Time Home Buyer Tax Credit Overstated? (blogs.wsj.com)
• 1.4 million Americans score $8,000 tax credit (money.cnn.com)

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

$8000 Tax Credit Update

*Some restrictions may NOT apply!

As we wrote about here, the current $8000 tax credit is quickly approaching its end, but there is a new bill being considered in Congress that would expand and extend the current credit greatly.

HR 2801, The Home Ownership Moves the Economy (HOME) Act of 2009 would extend the availability of the credit through 2010, expand it to include all home buyers, not just first timers, and would also remove the income restrictions of the current credit. Currently, the buyers must not make more than $75,000 if single or $150,000 for couples filing jointly, and there is a reduction in the credit for buyers with incomes up to $95,000 and $170,000, respectively.

Introduced by Rep. Howard Coble, R-NC, the bill is currently in front of the House Ways and Means Committee and if it passed by the House, it will then go to the Senate for review and passage before it is signed into law. Of course, nothing is certain at this point; the recent talk of extending the tax credit to $15,000 (S. 1230) has seen no traction and appears dead (see the widget in our sidebar to the right). There are two other similar bills before the House Ways and Means Committee: HR 2606, which is virtually identical to HR 2801, and HR 2905, which is also similar except that it seeks to extend the tax credit through 2011 instead of 2010. Both of these bills seem to be still active, but not much activity has been seen on them.

While we’re wondering where the additional money to fund the extended credit would come from, it would most likely be worth it if it continues to stimulate the housing market, as many experts feel it will. The current tax credit has brought many first time home buyers off the fence to purchase homes in the lower price ranges, hopefully if the extension is passed it will generate new business.

Here’s a widget that will track the status of the bill as it travels through the Hallowed Halls of Washington:

Remember, passage of this bill is far from a sure thing and certainly won’t happen tomorrow, but we’ll remain optimistic that it will eventually become law.

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

Congress Looks to Extend Home Buyer Tax Credit

...coming soon...

We’ve been reading a lot lately about the $8000 tax credit for first time home buyers and how it’s affected the housing market – or not, depending on whose opinion you read – and the gist of most posts nowadays is how fast the deadline is approaching for people to take advantage of it. The credit expires on November 30th, 2009 (not December 1st as a few articles have stated), but that’s not the important date to remember. The BIG DATE is:

OCTOBER 16, 2009

Why, you say? Well, as we, and many other Realtors® and mortgage lenders, have been pointing out, November 30th is the day the closing on your home must be completed. And, since most closings lately have been taking anywhere from 30 to 45 days (not counting short sales and foreclosures), it would behoove the prudent first time home buyer to have a fully executed contract no later than October 16th, 45 days from November 30th. And that’s cutting it close, if you ask us. There are still all kinds of unforeseen circumstances that can throw a monkey wrench into the works: troublesome inspections, late appraisals, mortgage rate changes, etc. Any one of these can delay a closing so that it exceeds the November 30th expiration date. In our opinion, if you’re going to take advantage of this tax credit, the sooner you begin the process the better, and the earlier you can get your contract signed and all the red tape cleared up, the better.

If you have any questions about the credit and want to get the ball rolling towards home ownership now, give us a call. We’d be happy to help. You can reach us at (203) 672-4499. In closing, we’re putting a countdown clock in this post to help remind you of just how close the deadline is:

UPDATE: TIME’S UP!!!

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

First Time Home Buyer Tax Credit Deadline Looming

[NEW UPDATE: It appears that this program was announced prematurely, as the mortgagee letter has been removed from the HUD web site. There has been no word if the program is dead or alive, and at this point the real estate and mortgage communities are in a "wait and see" mode until official notification of the program's status is released. We will post information about the program as we get it.]

In a move that the NAR has been lobbying for and is sure to brings smiles to all first time home buyers, The FHA today announced that it would begin allowing its lenders to let first time home buyers use the $8000 tax credit as a down payment on a home.  Up until now, buyers wouldn’t receive the funds until their tax returns were filed and they received their refund, and this has caused some home buyers to hesitate in using the  credit.

HUD Secretary Shaun Donovan made the announcement during his address at the 2009 REALTORS(r) Mid-Year Legislative Meetings and Trade Expo being held in Washington, D.C..

“We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said. He added that FHA lenders will be allowed to “monetize” the tax credit through short-term bridge loans, which would allow eligible home buyers to have the funds immediately at the closing table.

Hopefully, this should be a further stimulus to a group of home buyers that have been slow to utilize the credit. According to a survey commissioned by Move, Inc. (which operates Realtor.com), as of a month ago almost 50% of home buyers didn’t know the credit exists, and nearly a third said the credit wasn’t large enough to get them into the market right away. With the release of this new announcement, we hope that those percentages will shrink considerably.

[Update: you can find the full 2009 HUD Mortgagee Letter describing the usage of the tax credit as a down payment on FHA loans here in MS Word format.]

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

FHA to Allow Use of $8000 Tax Credit for Down Payments

President Barack Obama signed the American Recovery and Reinvestment Act into law Tuesday, which is great news for first time home buyers. We’re sure that some of you may have questions as to how it will affect you, so we have listed here the highlights of the bill:

• The tax credit is equivalent to 10% of the purchase price of the home, capping at $8,000;
• The credit applies only to first time home buyers and the home must be used as your principal residence;
• A first time home buyer is defined as anyone who has not owned a principal residence within the last 3 years;
• The credit will not need to be paid back, as with the earlier $7,500 credit;
• The credit is applicable towards homes that are purchased on or after January 1 and before December 1, 2009;
• Income restrictions are as follows: a single person must have an adjusted gross income of $75,000 or less, while married buyers are limited to an adjusted gross income of $150,000 or less;
• You will need to live in the home as your primary residence for at least 3 years to be able to keep the credit;
• If you should sell the home prior to the end of the 3 year period, you will be required to return the credit;
• To receive the credit, you must claim it on your tax return for 2009.

To be sure, this is only a simple list of the important points of the bill. If you have any questions about the credit or if you would like to see how you can take advantage of this great opportunity, please give us a call at (203) 605-3873 or email us at realestate@theharrimanteam.com. We’re here to help!

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

Highlights of Revised $8000 Tax Credit

Here is the wording of the section of the new H.R. 1, THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 that deals with the proposed $15,000 tax credit:

“Refundable First-time Home Buyer Credit. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. This proposal is estimated to cost $6.638 billion over 10 years.”

This legislation is due to be voted on Friday by the full Congress and passage is expected. More details will be posted as they are made available.

Post from: Wallingford Wired©2009 by Pat & Wayne Harriman

$15,000 Tax Credit Out, $8,000 Tax Credit In.