New Changes to the Homebuyer Tax Credit

President Obama has signed the extension of the Homebuyer Tax Credit which extends the credit of $8,000 to qualified first-time home buyers purchasing a primary residence on or before April 30th, 2010. Another exciting change is that the new bill expands the tax credit by offering a $6,500 tax credit to existing homeowners that purchase a primary residence between November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

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 home ownership history of both the home buyer and his/her spouse.

Definition of an Existing Home Owner or Repeat Buyer:

The law defines a tax credit qualified move-up home buyer (“long-time resident”) as a person who has owned and resided in the same home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the home ownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

How the Tax Credit amount is determined:

The tax credit for a first-time home owner is equal to 10 percent of the home’s purchase price up to a maximum of $8,000

The tax credit for a repeat home buyer is also equal to 10 percent of the home’s purchase price, but the maximum is $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.

Income Limits:

For first-timers and repeat buyers closing on a home after November 6, 2009 and on or before April 30th, 2010, the income limit for single taxpayers is $125,000 and the limit is $225,000 for married taxpayers filing a joint return.

How to Claim the Tax Credit:

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 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications 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. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.

Some Points to Keep in Mind:

Expanded tax credit benefits apply to members of the military, the foreign service and intelligence community. Go to http://www.federalhousingtaxcredit.com/service_mem.php for additional information.

Home purchases in 2010 may be claimed on an amended 2009 income tax return.

Persons who are claimed as dependents by a taxpayer or who are under age 18 do not qualify for a tax credit.

Home purchases from relatives of the taxpayer or the taxpayer’s spouse do not qualify for the tax credit. The IRS defines relatives as ancestors (parent, grandparent, etc.), lineal descendants (child, grandchildren, etc.) and spouses.

Married couples are not eligible to claim the first-time home buyer tax credit if either spouse has previously owned a home. Though, they may qualify for the repeat home buyer tax credit.

Neither the first-time home buyer tax credit nor the repeat home buyer tax credit have to be repaid unless the home is sold or is no longer used as the buyer’s principal residence within three years after the initial purchase.

Taxpayers must submit a copy of the HUD-1 settlement statement and IRS Form 5405 to claim the first-time home buyer tax credit or the repeat home buyer tax credit.


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Tips on Buying a Secondo Home on FL's Gulf Coast

Many families dream of owning a second home near the beach, but there are a lot of aspects to consider when shopping for a second home.

Location:
First, you have to decide where you want your second home to be and whether you and your family will be able to use it enough to make it worth the expense. The location should be one that you have visited more than once and that your whole family can enjoy together. That is why so many people choose the Gulf coast of Florida as their second home. The tranquil beaches and laid back attitude always make for a relaxing vacation for both young and old. Whether you like to fish, boat, go to the beach, kayak, shop, dine, hike wildlife trails, visit museums, or go to the theater the Sarasota Bradenton area has it all.

Expenses:
Once you have narrowed your location down, you must examine your finances and realize your budget. There are many expenses that are incurred by owning a second home. There are factors such as mortgage payments, insurance, lawn maintenance, repairs, utility bills and taxes which are expected. Although there are many expenses that you must be prepared for as well like flood and wind insurance, boat storage, golf course usage, and association dues and assessments to name a few. Once you have factored in these possible expenses you can make a responsible estimation of what you can afford, and then begin looking at properties.

To Rent or not To Rent:
You may decide that while your second home is not being used by your family, you can generate some extra income by renting out the property. This is another reason why the location is key. Make sure that it is a desirable and convenient location where people want to stay and that you hire a reputable property management company or rental agent to maintain the property and secure rentals while you are away.

Considering all of these factors will certainly help you to make the best decision for you and your family. For ALL local listings go to http://alexisglanz.com