> Title: A New Normal
>
> Date: For the Week of July 20, 2009
>
> People are beginning to realize (and even admit!) there are things to be learned
> from all that has caused so much pain, moaning, and bizarre reactions over the
> past year or so. The current recession has amounted to a wake-up call to some and
> a reminder to others.
>
> The reminder has come to those who have lived a bit longer and who climbed the economic
> success ladder through several decades of hard work. They remember what it was like
> before they could slap down plastic for every whim and be impulse shoppers. They
> recall things such as paying cash, saving to purchase, and repairing rather than
> tossing away and buying new.
>
> The wake-up call has been to the children and grandchildren of the people just described.
> It has even become trendy for them to compare notes with their once-extravagant
> peers about bargains found or the joy of eating at home. For some the motivation
> is not a shrinking paycheck so much as an enlarged environmental consciousness.
> Whatever the motive, the outcome is that simplicity is making a comeback. Thrift
> is in vogue. Frugal is fashionable.
>
> Michael Maniates, professor of Political and Environmental Science at Allegheny
> College, has been so bold as to put it this way: "Perhaps the silver lining [of
> the global recession] is that people are coming to realize they can live with less
> and their lives are richer for it."
>
> A Gallup Poll taken in April and reported last week in USA Today found that 27%
> of those interviewed say they are saving money now. What a contrast that is to the
> spending patters being reported two or three years ago! And 32% of those polled
> report they are not only spending less but also intend for the pattern of less spending
> and more saving to be the "new normal" for their lives.
>
> The 2009 MetLife Study of the American Dream produced another fascinating statistical
> insight. Nearly half of all consumers in the United States, 47%, report they already
> have what they need - up from only 34% in November 2006. I doubt the level of possessions
> owned changed so much as an attitude toward those possessions. Maybe something good
> has come from this mess.
>
> There is even a sneaking suspicion among some that we are looking at life through
> different eyes than we did in the greedy times of a quarter century ago. People
> seem to be valuing objects less but experiences and people more. We can only hope
> and pray it is so - and that such an attitude survives recovery.
>
> "Teach those who are rich in this world not to be proud and not to trust in their
> money, which is so unreliable. Their trust should be in God, who richly gives us
> all we need for our enjoyment. Tell them to use their money to do good. They should
> be rich in good works and generous to those in need, always being ready to share
> with others." (1 Timothy 6:17-18 NLT).
Friday, July 24, 2009
Friday, July 17, 2009
136 Days till first time home buyer tax credit expires!
The first-time homebuyer tax credit was enacted last year--and improved upon earlier this year--to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment,
You've decided to purchase a home and take advantage of the 2009 First-Time Home Buyer Tax Credit. Here's what you have to do to get your benefit:
•1. Contact a Lenders and get prequalified,
•2. Contact Nick Woodard to talk about your housing needs
•3. Close on your home purchase by November 30, 2009,
•4. Ensure that you are a qualified first-time buyer under IRS guidelines. Decide which year to file under, 2008 or 2009,
•5. File an amended 2008 return or choose to apply the credit to your 2009 tax return.
Deciding When to Apply the Credit
If you want the benefits of your credit as soon as possible:
You might choose to file under your 2008 tax year. Since April 15 has already passed, you would have to file an amendment to your return. However, if you've already filed for an extension of your 2008 return, then you can simply claim the credit when you submit your return.
If you anticipate a drop in income next year:
You can wait to claim the credit as part of your 2009 filing. In some cases the value of the credit might be higher, particularly if in 2008 you qualify for only a partial credit because your income is over $75,000 (single) or $150,000 (joint).
Your Next Steps
Once you have determined which year to apply the tax credit, you will need to do two things to claim the credit:
•1. Fill out Form 5405 to determine the amount of your available credit, and
•2. File an amended return for your 2008 taxes, or wait and apply to credit when you file your 2009 tax return
Nick Woodard
Hodges and Fooshee Realty
www.nickwoodard.com
nick@nickwoodard.com
615.566.9839
You've decided to purchase a home and take advantage of the 2009 First-Time Home Buyer Tax Credit. Here's what you have to do to get your benefit:
•1. Contact a Lenders and get prequalified,
•2. Contact Nick Woodard to talk about your housing needs
•3. Close on your home purchase by November 30, 2009,
•4. Ensure that you are a qualified first-time buyer under IRS guidelines. Decide which year to file under, 2008 or 2009,
•5. File an amended 2008 return or choose to apply the credit to your 2009 tax return.
Deciding When to Apply the Credit
If you want the benefits of your credit as soon as possible:
You might choose to file under your 2008 tax year. Since April 15 has already passed, you would have to file an amendment to your return. However, if you've already filed for an extension of your 2008 return, then you can simply claim the credit when you submit your return.
If you anticipate a drop in income next year:
You can wait to claim the credit as part of your 2009 filing. In some cases the value of the credit might be higher, particularly if in 2008 you qualify for only a partial credit because your income is over $75,000 (single) or $150,000 (joint).
Your Next Steps
Once you have determined which year to apply the tax credit, you will need to do two things to claim the credit:
•1. Fill out Form 5405 to determine the amount of your available credit, and
•2. File an amended return for your 2008 taxes, or wait and apply to credit when you file your 2009 tax return
Nick Woodard
Hodges and Fooshee Realty
www.nickwoodard.com
nick@nickwoodard.com
615.566.9839
Tuesday, June 23, 2009
Positive Addiction
Did you see that last week George Bush, the elder (President 41, as he's often called), jumped out of an airplane to celebrate his 85th birthday? I thought that was remarkable and appreciated his comment that he did it to remind all of us to stay active and keep doing new and interesting things. I like that! I understand he plans to do it again on his 90th birthday, and that challenged me to wonder what I might try in the next five years. How about you?
What will you achieve, learn, start (or stop) in the next five years?
There's an old quote that, "five years from now you'll be exactly who you are, and where you are today, except for the people you meet and the books you read." I always like to add that there are more ways to grow and change, but the point is well taken. Getting older is automatic; growth is a choice.
Many years ago, William Glasser wrote a wonderful little book called, Positive Addiction. Glasser has written many books and my impression is that this one sold fewer copies than his others, and that's a shame. There are "positive addictions."
Glasser talked about being addicted to exercise and fitness, or to the joys of relationships and creativity. I want to propose that personal development fits in that category. It's a good thing and like most addictions, it begins with a few clumsy or uncomfortable experiences, until it gradually becomes a core part of who we are.
Why not choose to be addicted to positive things?
I know people who are positively addicted to saving and investment. They get a thrill from adding to their savings every paycheck. They watch their investment balances go up and up. To relax on Saturdays, they look at investment properties or read annual reports, looking for the next opportunity.
Now, obviously, any positive addiction can go over-the-top and become a destructive obsession. Many years ago I loved running to the point that I gave myself a stress fracture--broke my leg--from running through pain! That's not good!
But here are some positive addictions I encourage you to consider:
1. Reading. Books open the world to us. Through books we get to know the most famous, creative, powerful and interesting people who ever lived. We can travel to other galaxies, expose ourselves to the past, and the future. We can experience other cultures and learn skills. We can "try on" ideas--and lives--we will never experience any other way. Read!
2. Exercise. I'm talking about fitness and health and movement and fun, not Olympic championships. For most of us, exercise is about play and being alive. It's about tennis or golf with friends, or basketball with our kids. It's about climbing a mountain, hiking on a beach, or a long bike ride on a Saturday morning. Exercise may add years to our lives; it definitely adds life to our years.
3. Ponder. Long ago a philosopher said, "the unobserved life is not worth living." I'm not sure I would go that far, but taking time to observe, to wonder, to contemplate and take notes definitely makes things better. Keep a journal. Pray or meditate. Enjoy moments of solitude. A great life doesn't happen by accident. It's the result of the careful, thoughtful choices we make.
4. Save money. Brian Tracy once said that "if you cannot save money, greatness is not in you." Again, that might be a bit extreme, but money is a representation of our lives. It's the result of the work and skill and contribution we make in the world. Saving creates opportunities and opens doors. It's insurance against misfortune and a source of self-respect. An addiction to saving definitely beats an addiction to spending!
5. Be curious. One of the most important traits of high achievers is their eagerness for new ideas and new skills. They are always "beginners" in at least one important area of life--willing to be clumsy or make mistakes while they learn new things. I'll go so far as to say if you aren't willing to be a clumsy beginner, you are refusing to grow and that's a terrible thing. Try stuff!
You don't have to jump out of airplanes to prove your positive addiction to growth, but it is one way to do it! Be addicted to exploring your life and becoming all that you can be. Whatever calls you, explore it! Whatever challenges or excites you, pursue it and see where it takes you. Jim Rohn observed that the vital importance of goals is not what we get from achieving them, but what we become in the process. Choose your addictions wisely, then invest in them and see where they take you
Nick Woodard
Hodges and Fooshee Realty
www.nickwoodard.com
615.566.9839
What will you achieve, learn, start (or stop) in the next five years?
There's an old quote that, "five years from now you'll be exactly who you are, and where you are today, except for the people you meet and the books you read." I always like to add that there are more ways to grow and change, but the point is well taken. Getting older is automatic; growth is a choice.
Many years ago, William Glasser wrote a wonderful little book called, Positive Addiction. Glasser has written many books and my impression is that this one sold fewer copies than his others, and that's a shame. There are "positive addictions."
Glasser talked about being addicted to exercise and fitness, or to the joys of relationships and creativity. I want to propose that personal development fits in that category. It's a good thing and like most addictions, it begins with a few clumsy or uncomfortable experiences, until it gradually becomes a core part of who we are.
Why not choose to be addicted to positive things?
I know people who are positively addicted to saving and investment. They get a thrill from adding to their savings every paycheck. They watch their investment balances go up and up. To relax on Saturdays, they look at investment properties or read annual reports, looking for the next opportunity.
Now, obviously, any positive addiction can go over-the-top and become a destructive obsession. Many years ago I loved running to the point that I gave myself a stress fracture--broke my leg--from running through pain! That's not good!
But here are some positive addictions I encourage you to consider:
1. Reading. Books open the world to us. Through books we get to know the most famous, creative, powerful and interesting people who ever lived. We can travel to other galaxies, expose ourselves to the past, and the future. We can experience other cultures and learn skills. We can "try on" ideas--and lives--we will never experience any other way. Read!
2. Exercise. I'm talking about fitness and health and movement and fun, not Olympic championships. For most of us, exercise is about play and being alive. It's about tennis or golf with friends, or basketball with our kids. It's about climbing a mountain, hiking on a beach, or a long bike ride on a Saturday morning. Exercise may add years to our lives; it definitely adds life to our years.
3. Ponder. Long ago a philosopher said, "the unobserved life is not worth living." I'm not sure I would go that far, but taking time to observe, to wonder, to contemplate and take notes definitely makes things better. Keep a journal. Pray or meditate. Enjoy moments of solitude. A great life doesn't happen by accident. It's the result of the careful, thoughtful choices we make.
4. Save money. Brian Tracy once said that "if you cannot save money, greatness is not in you." Again, that might be a bit extreme, but money is a representation of our lives. It's the result of the work and skill and contribution we make in the world. Saving creates opportunities and opens doors. It's insurance against misfortune and a source of self-respect. An addiction to saving definitely beats an addiction to spending!
5. Be curious. One of the most important traits of high achievers is their eagerness for new ideas and new skills. They are always "beginners" in at least one important area of life--willing to be clumsy or make mistakes while they learn new things. I'll go so far as to say if you aren't willing to be a clumsy beginner, you are refusing to grow and that's a terrible thing. Try stuff!
You don't have to jump out of airplanes to prove your positive addiction to growth, but it is one way to do it! Be addicted to exploring your life and becoming all that you can be. Whatever calls you, explore it! Whatever challenges or excites you, pursue it and see where it takes you. Jim Rohn observed that the vital importance of goals is not what we get from achieving them, but what we become in the process. Choose your addictions wisely, then invest in them and see where they take you
Nick Woodard
Hodges and Fooshee Realty
www.nickwoodard.com
615.566.9839
Wednesday, June 3, 2009
First Time Home Buyers modification
Recent development in the $8,000 First Time Home Buyer Tax Credit
Another recent development: Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment, released in an article on Realtor.org.
The Secretary of Housing and Urban Development has announced that HUD will allow “monetization” of the tax credit. What does that mean?
It means that HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.
The guidelines also allow longer term loans secured by second liens to be used by government agencies, such as state housing finance agencies, to facilitate home sales.
Housing finance agencies and other government entities may issue tax credit loans, the funds of which home buyers may use to satisfy the FHA 3.5% downpayment requirement.
In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5% downpayment that is required for FHA-insured homes.
**This will be a huge step towards stabilizing the ever shifting economy. By allowing purchasers to receive the credit immediately it will keep more funds available to the entire market for things like furnishings, repairs, renovations, etc. This should give a much needed shot in the arm to the ailing building and renovation sectors.
In addition, some of the most common questions I get about the tax credit (answers from Tax Credit Website above):
If my wife/husband has not purchased a home before can we qualify for the tax credit? – Unfortunately not, 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.
Do I have to be a first-time buyer to get the credit? Yes, however 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. Therefore if you have been renting for that period of time you may qualify.
What does it mean the credit is “refundable”? – 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 (Ex: if a buyer owes the IRS $1,000 on April 15th after all calculations & deductions. The taxpayer would receive a check for $7,000 = $8,000 minus the $1,000 owed).
Nick Woodard
Hodges and Fooshee Realty
615.566.9839
www.nickwoodard.com
Another recent development: Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment, released in an article on Realtor.org.
The Secretary of Housing and Urban Development has announced that HUD will allow “monetization” of the tax credit. What does that mean?
It means that HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.
The guidelines also allow longer term loans secured by second liens to be used by government agencies, such as state housing finance agencies, to facilitate home sales.
Housing finance agencies and other government entities may issue tax credit loans, the funds of which home buyers may use to satisfy the FHA 3.5% downpayment requirement.
In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5% downpayment that is required for FHA-insured homes.
**This will be a huge step towards stabilizing the ever shifting economy. By allowing purchasers to receive the credit immediately it will keep more funds available to the entire market for things like furnishings, repairs, renovations, etc. This should give a much needed shot in the arm to the ailing building and renovation sectors.
In addition, some of the most common questions I get about the tax credit (answers from Tax Credit Website above):
If my wife/husband has not purchased a home before can we qualify for the tax credit? – Unfortunately not, 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.
Do I have to be a first-time buyer to get the credit? Yes, however 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. Therefore if you have been renting for that period of time you may qualify.
What does it mean the credit is “refundable”? – 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 (Ex: if a buyer owes the IRS $1,000 on April 15th after all calculations & deductions. The taxpayer would receive a check for $7,000 = $8,000 minus the $1,000 owed).
Nick Woodard
Hodges and Fooshee Realty
615.566.9839
www.nickwoodard.com
Wednesday, April 1, 2009
Pending Home sale rise in Feb
Pending home sales rise in February
Lured by low rates, deep discounts, buyers creeping back into market
updated 16 minutes ago
WASHINGTON - An index that tracks signed contracts to purchase previously occupied homes rose in February from a record low a month earlier as U.S. buyers took advantage of deeply discounted prices and low interest rates.
The National Association of Realtors said Wednesday said its seasonally adjusted index of pending sales for previously occupied homes rose 2.1 percent — in line with expectations — to 82.1 in February from January's record low of 80.4.
Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future home sales.
Because of falling home prices and mortgage rates, homeownership is more affordable than it's been since at least 1970, the trade group said.
Hopes have been growing that home sales, while still severely depressed, may be finally showing signs of life. Sales of existing home sales rose 5.1 percent in February, the largest increase in nearly six years.
Prices, however, are expected to keep falling for at least another year. Tens of thousands of homes are tied up in the foreclosure process and not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.
The Realtors estimate that 45 percent of existing home sales are now foreclosures and other distressed properties.
Many in the real estate industry are counting on an $8,000 tax credit for first-time homebuyers as their best hope for boosting flagging sales. That incentive was included in the economic stimulus package signed by President Barack Obama earlier this year.
"We expect home sales to gain momentum in the second half of the year with first-time buyers absorbing a lot of the excess inventory," Lawrence Yun, the trade group's chief economist, said in a statement. "Under these conditions, we should see price stabilization in most markets by the end of the year."
Nick Woodard
Realtor
www.nickwoodard.com
Lured by low rates, deep discounts, buyers creeping back into market
updated 16 minutes ago
WASHINGTON - An index that tracks signed contracts to purchase previously occupied homes rose in February from a record low a month earlier as U.S. buyers took advantage of deeply discounted prices and low interest rates.
The National Association of Realtors said Wednesday said its seasonally adjusted index of pending sales for previously occupied homes rose 2.1 percent — in line with expectations — to 82.1 in February from January's record low of 80.4.
Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future home sales.
Because of falling home prices and mortgage rates, homeownership is more affordable than it's been since at least 1970, the trade group said.
Hopes have been growing that home sales, while still severely depressed, may be finally showing signs of life. Sales of existing home sales rose 5.1 percent in February, the largest increase in nearly six years.
Prices, however, are expected to keep falling for at least another year. Tens of thousands of homes are tied up in the foreclosure process and not yet for sale. Plus, as the recession deepens and job losses mount, many buyers are likely to stay on the sidelines.
The Realtors estimate that 45 percent of existing home sales are now foreclosures and other distressed properties.
Many in the real estate industry are counting on an $8,000 tax credit for first-time homebuyers as their best hope for boosting flagging sales. That incentive was included in the economic stimulus package signed by President Barack Obama earlier this year.
"We expect home sales to gain momentum in the second half of the year with first-time buyers absorbing a lot of the excess inventory," Lawrence Yun, the trade group's chief economist, said in a statement. "Under these conditions, we should see price stabilization in most markets by the end of the year."
Nick Woodard
Realtor
www.nickwoodard.com
Thursday, February 26, 2009
Federal Housing Tax Credit
Frequently Asked Questions About the Home Buyer Tax Credit
The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.
The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
Who is eligible to claim the tax credit?
What is the definition of a first-time home buyer?
How is the amount of the tax credit determined?
Are there any income limits for claiming the tax credit?
What is "modified adjusted gross income"?
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Can you give me an example of how the partial tax credit is determined?
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
How do I claim the tax credit? Do I need to complete a form or application?
What types of homes will qualify for the tax credit?
I read that the tax credit is "refundable." What does that mean?
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?
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
I am not a U.S. citizen. Can I claim the tax credit?
Is a tax credit the same as a tax deduction?
I bought a home in 2008. Do I qualify for this credit?
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
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?
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.
What is the definition of a first-time home buyer?
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.
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.
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.
What is "modified adjusted gross income"?
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.
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.
Can you give me an example of how the partial tax credit is determined?
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.
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.
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.
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.
I read that the tax credit is "refundable." What does that mean?
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).
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.
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
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.
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.
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.
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.
Is a tax credit the same as a tax deduction?
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.
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.
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
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.
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
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.
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.
NAHB is providing the information on this web site for general guidance only. The information on this site does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action on this information, you should consult a qualified professional adviser to whom you have provided all of the facts applicable to your particular situation or question. None of the tax information on this web site is intended to be used nor can it be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
1201 15th Street, NW
Washington, DC 20005
Copyright © 2009 National Association of Home Builders. All rights reserved.
Very important Read!!
Nick Woodard
www.nick
The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.
The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
Who is eligible to claim the tax credit?
What is the definition of a first-time home buyer?
How is the amount of the tax credit determined?
Are there any income limits for claiming the tax credit?
What is "modified adjusted gross income"?
If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Can you give me an example of how the partial tax credit is determined?
How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
How do I claim the tax credit? Do I need to complete a form or application?
What types of homes will qualify for the tax credit?
I read that the tax credit is "refundable." What does that mean?
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?
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
I am not a U.S. citizen. Can I claim the tax credit?
Is a tax credit the same as a tax deduction?
I bought a home in 2008. Do I qualify for this credit?
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
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?
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.
What is the definition of a first-time home buyer?
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.
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.
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.
What is "modified adjusted gross income"?
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.
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.
Can you give me an example of how the partial tax credit is determined?
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.
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.
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.
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.
I read that the tax credit is "refundable." What does that mean?
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).
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.
Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
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.
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.
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.
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.
Is a tax credit the same as a tax deduction?
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.
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.
Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
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.
If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
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.
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.
NAHB is providing the information on this web site for general guidance only. The information on this site does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action on this information, you should consult a qualified professional adviser to whom you have provided all of the facts applicable to your particular situation or question. None of the tax information on this web site is intended to be used nor can it be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
1201 15th Street, NW
Washington, DC 20005
Copyright © 2009 National Association of Home Builders. All rights reserved.
Very important Read!!
Nick Woodard
www.nick
Friday, February 20, 2009
$8000 tax credit to first time home buyers
Final score: $8,000 for homebuyers
First-time purchasers get a tax credit windfall if they buy before December.
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NEW YORK (CNNMoney.com) -- There's a nice windfall for some homebuyers in the economic stimulus bill awaiting President Obama's signature on Tuesday. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.
A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"
The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:
Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Lukewarm reception
The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.
"[The Senate version] would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). "We have a lot of reports of people who would be coming off the fence because of it."
Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.
The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. "I think there are many homeowners who would be trading-up but they have had no buyers for their own homes," Yun said.
Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.
One state, Missouri, is trying to get around that problem by creating a short-term loan on the tax credit of up to $6,750. The state would loan borrowers the money so they could use it at closing as part of the downpayment. Then, when the buyers receive their tax credit from the IRS, they pay back the state. Other states may follow with similar programs, according to NAHB's Dietz.
Many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.
And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower
Nick Woodard
Middle Tennessee Real Estate Advisor
www.nickwoodard.com
615.566.9839
nick@nickwoodard.com
First-time purchasers get a tax credit windfall if they buy before December.
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See all CNNMoney.com RSS FEEDS (close) By Les Christie, CNNMoney.com staff writer
Last Updated: February 17, 2009: 12:13 PM ET
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Banks pounded by nationalization fear
Get ready for a wave of bank failures
Nonprofits: Misery loves company
Consumer prices edge higher
Stock selloff accelerates
Inside Obama's economic brain
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Current Mortgage Rates
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30 yr fixed mtg 5.26%
15 yr fixed mtg 4.86%
30 yr fixed jumbo mtg 6.96%
5/1 ARM 5.53%
5/1 jumbo ARM 5.93%
Find personalized rates:
NEW YORK (CNNMoney.com) -- There's a nice windfall for some homebuyers in the economic stimulus bill awaiting President Obama's signature on Tuesday. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.
A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"
The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:
Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Lukewarm reception
The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.
"[The Senate version] would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). "We have a lot of reports of people who would be coming off the fence because of it."
Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.
The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. "I think there are many homeowners who would be trading-up but they have had no buyers for their own homes," Yun said.
Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.
One state, Missouri, is trying to get around that problem by creating a short-term loan on the tax credit of up to $6,750. The state would loan borrowers the money so they could use it at closing as part of the downpayment. Then, when the buyers receive their tax credit from the IRS, they pay back the state. Other states may follow with similar programs, according to NAHB's Dietz.
Many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.
And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower
Nick Woodard
Middle Tennessee Real Estate Advisor
www.nickwoodard.com
615.566.9839
nick@nickwoodard.com
Friday, January 30, 2009
Existing home sales picking up speed!
Existing-Home Sales Show Strong Gain In December
WASHINGTON, January 26, 2009
Existing-home sales rose unexpectedly while inventory declined, led by a surge of sales in the West, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate1 of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million-unit pace in December 2007.
For all of 2008 there were 4,912,000 existing-home sales, which was 13.1 percent below the 5,652,000 transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales.
Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”
Total housing inventory at the end of December fell 11.7 percent to 3.68 million existing homes available for sale, which represents a 9.3-month supply2 at the current sales pace, down from a 11.2-month supply in November.
Yun said the market is underperforming and hurting the broader economy. “We’ve added 25 million people to our population over the past decade and housing affordability conditions are the best we’ve seen since 1973, but household formation is much lower than expected,” he said. “Consequently, there is a pent-up demand which could be unleashed with the right stimulus, including a non-repayable home buyer tax credit. The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery.”
The national median existing-home price3 for all housing types was $175,400 in December, which is 15.3 percent below December 2007 when the median was $207,000. There remains a significant downward distortion in the current median from a large number of distress sales at discounted prices, currently 45 percent of transactions; the median is where half of the homes sold for more and half sold for less. For all of 2008, the median price was $198,600, down 9.3 percent from $219,000 in 2007.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s an excellent time for first-time home buyers with good jobs. “The typical buyer plans to stay in their home for 10 years, which is the correct approach in today’s market,” he said. “With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who’ve been on the fence should take a closer look at today’s market.”
McMillan added that first-time buyers may want to consider an FHA loan, which offers downpayments of 3.5 percent on a safe 30-year fixed-rate mortgage.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.29 percent in December from 6.09 percent in November; the rate was 6.10 percent in December 2007. Last week, Freddie Mac reported the 30-year rate was 5.12 percent.
Single-family home sales rose 7.0 percent to a seasonally adjusted annual rate of 4.26 million in December from a level of 3.98 million in November, but are 1.4 percent below a 4.32 million-unit pace in December 2007. For all of 2008, single-family sales fell 11.9 percent to 4,349,000.
The median existing single-family home price was $174,700 in December, down 14.8 percent from a year ago. For all of 2008, the single-family median was $197,100, which is 9.5 percent below 2007.
Existing condominium and co-op sales increased 2.1 percent to a seasonally adjusted annual rate of 480,000 units in December from 470,000 in November, but are 18.4 percent below the 588,000-unit level a year ago. For all of 2008, condo sales dropped 21.0 percent to 563,000 units.
The median existing condo price4 was $181,400 in December, down 18.3 percent from December 2007. For all of 2008, the median condo price was $210,000, which is 7.2 percent below 2007.
Regionally, existing-home sales in the Northeast slipped 1.4 percent to an annual pace of 720,000 in December, and are 14.3 percent below December 2007. The median price in the Northeast was $235,000, which is 7.8 percent lower than a year ago.
Existing-home sales in the Midwest increased 4.0 percent in December to a level of 1.04 million but are 10.3 percent below a year ago. The median price in the Midwest was $140,800, down 11.4 percent from December 2007.
In the South, existing-home sales rose 7.4 percent to an annual pace of 1.74 million in December, but are 11.2 percent lower than December 2007. The median price in the South was $158,600, which is down 8.0 percent from a year ago.
Existing-home sales in the West jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago. The median price in the West was $213,100, down 31.5 percent from December 2007.
# # #
1The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
2Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases.
3The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
4Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for January – including monthly revisions to sales rates for the past three years – will be released February 25. Each February, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data for the previous three years based on the most recent findings. Revisions will made to monthly seasonally adjusted annual sales rates for 2006 through 2008, as well as the inventory month's supply data. There will be no revisions to raw inventory or home prices aside from the normal prior month revisions.
The next Pending Home Sales Index & Forecast is scheduled for release February 3; release times are 10 a.m. EST. For more information, please view existing-home sales data on REALTOR.org.
Nick Woodard
Hodges and Fooshee Realty
Nashville, Tennessee
615-566-9839
nick@nickwoodard.com
WASHINGTON, January 26, 2009
Existing-home sales rose unexpectedly while inventory declined, led by a surge of sales in the West, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate1 of 4.74 million units in December from a downwardly revised pace of 4.45 million units in November, but are 3.5 percent below the 4.91 million-unit pace in December 2007.
For all of 2008 there were 4,912,000 existing-home sales, which was 13.1 percent below the 5,652,000 transactions recorded in 2007. This is the lowest volume since 1997 when there were 4,371,000 sales.
Lawrence Yun, NAR chief economist, said home prices continue to fall significantly. “It appears some buyers are taking advantage of much lower home prices,” he said. “The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balanced conditions. Buyers will continue to have an edge over sellers for the foreseeable future.”
Total housing inventory at the end of December fell 11.7 percent to 3.68 million existing homes available for sale, which represents a 9.3-month supply2 at the current sales pace, down from a 11.2-month supply in November.
Yun said the market is underperforming and hurting the broader economy. “We’ve added 25 million people to our population over the past decade and housing affordability conditions are the best we’ve seen since 1973, but household formation is much lower than expected,” he said. “Consequently, there is a pent-up demand which could be unleashed with the right stimulus, including a non-repayable home buyer tax credit. The Obama administration and Congress need to move fast to stimulate a spring sales upturn which will help to stabilize home prices and set the foundation for a sustainable economic recovery.”
The national median existing-home price3 for all housing types was $175,400 in December, which is 15.3 percent below December 2007 when the median was $207,000. There remains a significant downward distortion in the current median from a large number of distress sales at discounted prices, currently 45 percent of transactions; the median is where half of the homes sold for more and half sold for less. For all of 2008, the median price was $198,600, down 9.3 percent from $219,000 in 2007.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s an excellent time for first-time home buyers with good jobs. “The typical buyer plans to stay in their home for 10 years, which is the correct approach in today’s market,” he said. “With historically low mortgage interest rates, flexible sellers, a large inventory, and homes that are selling for less than replacement construction costs in much of the country, buyers who’ve been on the fence should take a closer look at today’s market.”
McMillan added that first-time buyers may want to consider an FHA loan, which offers downpayments of 3.5 percent on a safe 30-year fixed-rate mortgage.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.29 percent in December from 6.09 percent in November; the rate was 6.10 percent in December 2007. Last week, Freddie Mac reported the 30-year rate was 5.12 percent.
Single-family home sales rose 7.0 percent to a seasonally adjusted annual rate of 4.26 million in December from a level of 3.98 million in November, but are 1.4 percent below a 4.32 million-unit pace in December 2007. For all of 2008, single-family sales fell 11.9 percent to 4,349,000.
The median existing single-family home price was $174,700 in December, down 14.8 percent from a year ago. For all of 2008, the single-family median was $197,100, which is 9.5 percent below 2007.
Existing condominium and co-op sales increased 2.1 percent to a seasonally adjusted annual rate of 480,000 units in December from 470,000 in November, but are 18.4 percent below the 588,000-unit level a year ago. For all of 2008, condo sales dropped 21.0 percent to 563,000 units.
The median existing condo price4 was $181,400 in December, down 18.3 percent from December 2007. For all of 2008, the median condo price was $210,000, which is 7.2 percent below 2007.
Regionally, existing-home sales in the Northeast slipped 1.4 percent to an annual pace of 720,000 in December, and are 14.3 percent below December 2007. The median price in the Northeast was $235,000, which is 7.8 percent lower than a year ago.
Existing-home sales in the Midwest increased 4.0 percent in December to a level of 1.04 million but are 10.3 percent below a year ago. The median price in the Midwest was $140,800, down 11.4 percent from December 2007.
In the South, existing-home sales rose 7.4 percent to an annual pace of 1.74 million in December, but are 11.2 percent lower than December 2007. The median price in the South was $158,600, which is down 8.0 percent from a year ago.
Existing-home sales in the West jumped 13.6 percent to an annual rate of 1.25 million in December and are 31.6 percent higher than a year ago. The median price in the West was $213,100, down 31.5 percent from December 2007.
# # #
1The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
2Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982. Condos were tracked quarterly prior to 1999 when single-family homes accounted for more than nine out of 10 purchases.
3The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.
4Because there is a concentration of condos in high-cost metro areas, the national median condo price can be higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.
Existing-home sales for January – including monthly revisions to sales rates for the past three years – will be released February 25. Each February, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data for the previous three years based on the most recent findings. Revisions will made to monthly seasonally adjusted annual sales rates for 2006 through 2008, as well as the inventory month's supply data. There will be no revisions to raw inventory or home prices aside from the normal prior month revisions.
The next Pending Home Sales Index & Forecast is scheduled for release February 3; release times are 10 a.m. EST. For more information, please view existing-home sales data on REALTOR.org.
Nick Woodard
Hodges and Fooshee Realty
Nashville, Tennessee
615-566-9839
nick@nickwoodard.com
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