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First Time Home Buyer’s Credit: A Breakdown of the Details

by Mark Brace
 
With all the buzz surrounding the credit for first time home buyer’s that the American Recovery and Reinvestment Act of 2009 includes, it may be hard to decipher all the details to see who and what exactly are included. This Act is summarized as “A bill to create jobs, restore economic growth, and strengthen America's middle class through measures that modernize the nation's infrastructure, enhance America's energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief, and protect those in greatest need, and for other purposes.”
 
According to a recent news release by the U.S. Department of the Treasury, home buyers who qualify can now take advantage of the stimulus package for their 2008 taxes, which need to be filed by April 15. An important thing to be aware of is that automatic extensions can be issued to many taxpayers until October 15, which would allow the credit to be available earlier. The estimated tax liability must be paid when the extension is filed. Those who qualify may also apply the tax credit towards their 2009 taxes.
 
"For first-time home buyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit. This important change gives qualifying home buyers cash they do not have to pay back," said Doug Shulman, IRS Commissioner.
 
Here are the specifics:  
 
Who: Any first time home buyer, defined as an individual who has not owned a home in the previous three years. If the buyer is a married couple, both spouses must meet the individual qualifications. Unmarried couples, where one meets the qualifications but the other does not, may assign the tax credit to the one who qualifies.
 
There are also restrictions due to a person’s Modified Adjusted Gross Income, or MAGI. Modified Adjusted Gross Income (MAGI) is an individual’s Adjusted Gross Income with certain amounts added back such as foreign income, foreign-housing deductions, student loan deductions, IRA contributions and deductions for higher-education costs. To determine this with certainty, a visit to a qualified tax accountant would be essential.
 
The tax credit is available to for individuals whose Modified Adjusted Gross Income (MAGI) is $75,000 or less, and married couples with a MAGI of $150,000 or less. If a person purchases in 2009 and can show that they will qualify for the tax credit they can have their employer reduce their payroll deductions per pay period thereby realizing some or all of the credit during 2009. Also, if the tax credit exceeds the income tax due, the difference will be refunded to the tax payer.
 
Individuals whose MAGI is more than $75,000 but less than $95,000 qualify for a pro-rated portion of the potential $8,000 credit. Married couples whose MAGI is more than $150,000 but less than $170,000 qualifies for a pro-rated portion on the tax credit.
 
Individuals who have a MAGI of $95,000 or more and married couples who have a MAGI of $170,000 or more do not qualify for the tax credit. Resident aliens and nonresident aliens may qualify for this tax credit.
 
What: The tax credit is 10% of the purchase price or $8,000-whichever is less on home purchases made before Dec. 1, 2009. New construction, condominiums, manufactured housing and even house boats qualify. The tax payer/owner must own and occupy the home for three years to not have to repay the credit.
 
When: Now until Dec. 1, 2009 for purchases, filing for the actual credit extends until April 15, 2010 when 2009 taxes will need to be filed.
 
Where: Any qualifying property in the United States. The tax credit is available on the IRS’s website. Visit the IRS's first-time home buyer page by clicking here
 
How: After purchasing, new owner would need to file Form 5405, which can be found at the above link.

Helpful Information for City of Wyoming Investors

by Mark Brace

The City of Wyoming recently made a policy change that is important to note of anyone currently owning or looking to purchase a rental unit within Wyoming units. Now, the Rental Registration Program includes one and two family rental units. While registration is free, there is a fee of $98.00 per unit, and a $500 penalty if the property is not certified or registered.

March 1, 2009 is the deadline for all rental properties to be registered. Program requirements state that inspections will occur on a biennial cycle. A Certificate of Compliance will be issued once inspections are completed and approved. If you have any questions contact the Rental Registration Inspector, David Rupert, at 616-249-3843.

 

For the registration form, please click below:

http://www.ci.wyoming.mi.us/Building/Rental%20Registration%20Form.pdf

 

 

 

 

Housing Details in New Stimulus Bill

by Mark Brace
Part of the new $787 billion stimulus plan signed this morning by President Obama brings not only great relief for current homeowners, but future home-buyers too.
 
There are three key benefits to buyers, and sellers will also benefit because of the incentive, provided to those looking to become first time homebuyers
1)     The tax credit will be raised to $8000. It will be a true credit, one that does not need to be paid back, so first time home buyers receive an indirect "reduction" in the price they pay.
2)     Interest rates have come down 125-150 basis points, making home ownership more affordable.
3)     The loan limits will be raised to $727,000 in high cost areas
 
This table from Scott DeWolf might also be helpful in deciphering some of the bill's details, with the major modifications shaded:
 
FEATURE
CREDIT AS CREATED JULY 2008
APPLIES TO ALL QUALIFIED PURCHASES ON OR AFTER APRIL 9, 2008
REVISED CREDIT –
EFFECTIVE FOR PURCHASES ON OR AFTER JANUARY 1, 2009 AND BEFORE DECEMBER 1, 2009
Amount of Credit
Lesser of 10 percent of cost of home or $7500
Maximum credit amount increased to $8000
Eligible Property
Any single family residence (including condos, co-ops, townhouses) that will be used as a principal residence.
No change
All principal residences eligible.
Refundable
Yes.  Reduces (or can eliminate) income tax liability for the year of purchase.  Any unused amount of tax credit refunded to purchaser.
No change
Purchasers will continue to receive refund for unused amount when tax return is filed.
Income Limit
Yes.  Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return).  Phases out above those caps ($95,000 and $170,000).
No change
 
Same income limits continue to apply.
 
First-time Homebuyer Only
Yes.  Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
No change
Still available for first-time purchasers only.  Three-year rule continues to apply.
Revenue Bond Financing
No credit allowed if home financed with state/local bond funding.
Purchasers who utilize revenue bond financing can use credit.
Repayment
Yes.  Portion (6.67% of credit or $500) to be repaid each year for 15 years, starting with 2010 tax filing.
No repayment for purchases on or after January 1, 2009 and before December 1, 2009
Recapture
If home sold before 15-year repayment period ends, then outstanding balance of repayment amount recaptured on sale.
If home is sold within three years of purchase, entire amount of credit is recaptured on sale.  Applies only to homes purchased in 2009.
Termination
July 1, 2009 
(But note program changes for 2009)
December 1, 2009
 
 
Effective Date
Purchases on or after April 9, 2008 and before January 1, 2009.  Repayment to begin for 2010 tax year.
All revisions are effective as of January 1, 2009

First Time Homebuyers Tax Form

by Mark Brace

As part of Congress's stimulus bill, a generous tax credit is available to those buying a home for the first time. If you qualify, you may get up to $7,500 or 10% of the home's purchase price.

In order to obtain the Federal tax credit for first time homebuyers, you'll want to make sure you fill out the forms below.

While the stimulus bill is still changing within Congress, the latest buzz is that it will change to $8,000 for first time buyers only.

 www.markbrace.com/agent_files/1sttimehomeownertaxform.pdf

Appealing Your Assessed Home Value

by Mark Brace

If you have recently purchased a home, or had your home reassessed and are surprised by the assessment,  don't lose hope-there is an appeal process. While the City of Grand Rapids requires documented proof and details on your home, the time spent on the appeal could save you big.

To start the process, please view a copy of the necessary appeal form at:

http://www.markbrace.com/links.asp 

 Click underneath the Assessed Home Value Appeal Link. Once you have all the relevant information gathered, send in the form by February 13, 2009 to:

Office of City Assessor

300 Monroe Ave NW

Grand Rapids MI 49503

Displaying blog entries 1-5 of 5

Contact Information

Mark Brace, Realtor, ABR, GRI, CRS, SRES, e-PRO, A
Berkshire Hathaway HomeServices Michigan Real Estate
3000 East Beltline NE
Grand Rapids MI 49525
Direct: (616) 447-7025
Cell: (616) 540-7705
Fax: (616) 447-7025

Berkshire Hathaway HomeServices - Michigan Real Estate is a full service, locally operated real estate brokerage company backed by the strength of a solid national and global brand. Our full service businesses include Residential, Commercial, Relocation, Mortgage, Insurance, Home Services and New Homes & Land. Our core values, service philosophy, cutting edge technology, and most importantly our people are what make us the leading real estate company in Michigan. We are committed to providing the highest quality real estate services possible and making each customer's experience one that surpasses their expectations.