YsGuy.com Blog

The New Tax Stimulus Bill as it Relates to Real Estate Explained in English

deanodean — Tue, 24 Nov 2009 03:27:57 +0000

Thanks to Don McClure from Bank of America who shared this great information with me regarding some exciting news for those considering buying their first home; or for those buying up if they’ve been a home for some time.

Tax Credit for Homebuyers

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Tax Credit Versus Tax Deduction

It’s important to remember that the tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

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Remember, the new tax credit program includes a number of details and qualifications. For more information or answers to specific questions, please call or email me today.

In addition, you may be able to benefit from additional housing related provisions, including the following:

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Tax Incentives to Spur Energy Savings and Green Jobs

This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings

This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing

This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance

This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

As always, if you have any questions about your specific situation or would like to discuss how you may benefit from this program, please call or email me. I’ll be happy to sit down with you.

Don McClure
Mortgage Loan Officer
Bank of America Home Loans
Don.McClure@BankofAmerica.com
801-492-7120 Direct
801-830-2550 Mobile

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Dean Crandall is a licensed REALTOR with Keller Williams Westfield Real Estate based in beautiful Utah County. He has six successful years of helping clients and friends find and sell homes, land and investment properties.

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112

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YsGuy.com & DeanoDean, Inc. make no representations as to accuracy, completeness, correctness, current-ness, suitability, or validity of any information on this blog and will not be liable for any errors or omissions in this information or for any losses, injuries, or damages arising from its display or use; including, but not limited to, methane gases, body odor, computer and keyboard rage, and sleepless nights. All blog posts are the constantly changing opinions of the author(s) and may occasionally contain bad opinions. They are not approved to diagnose, treat, cure or prevent any disease. Please make decisions based on advice of competent, licensed professionals.

FHA Condo Approval UPDATE

deanodean — Mon, 23 Nov 2009 14:22:11 +0000

Looking to purchase a condominium or townhome for yourself or for an investment property? Before you do, please check with your REALTOR and lender to make sure the community meets the Federal Housing Administration’s guidelines for resale purposes/considerations in the future. Here’s the latest news about new FHA rules.

This update contains the temporary changes to the FHA Condo Approval Process as outlined in Mortgage Letter 2009-46 B.

Here are the 6 things you need to know about these changes:

1. These temporary changes are effective on December 7th, 2009 through December 31st 2010; except for Spot Loan Approvals.

2. Spot Loan Approvals will be eliminated as of February 1st, 2010.

3. FHA loan concentration may be increased to 100% if the following criteria are met: a. Project construction has been 100% complete for at least 1 year, b. All units have been sold and no single entity owns more than 10% of the units, c. Project holds 10% of the budget in reserves for capital expenditures and deferred maintenance, d. Control of Home Owner’s Association has been transferred to the owners, and e. Owner-occupancy is at least 50%.

4. FHA requires a 50% owner-occupant ratio but bank-owned units that are either vacant or tenant-occupied are not required to be included the calculation.

5. New construction pre-sale requirement is temporarily reduced to 30%.

6. Florida projects must be approved by the Atlanta Home Ownership Center. Lenders are NOT allowed to approve them.

Plus here is some info about the tax credit.

The 5 year period for 2nd time home buyers starts on the closing date of their current house

As for people looking to purchase a duplex and live in one side, this is directly from the IRS’s website.

Q. I purchased a duplex home with two separate dwelling units. I will live in one dwelling and will rent out the other dwelling unit and report the rental income on Schedule E. May I qualify for the first-time homebuyer credit, and what amount do I use for the purchase price to determine the amount of the credit?

A. Yes, you may qualify for the credit for the dwelling unit that you use as your principal residence. To determine the amount of your credit, you must allocate the purchase price of the duplex between the two separate dwelling units. Your credit is 10% of the portion of the purchase price of the duplex allocated to your dwelling unit that you use as your principal residence, up to a maximum credit of $8,000. You may not use the entire purchase price of the duplex to determine the amount of your credit.

This update is courtesy of Spencer Haymond, Mortgage Banker, Envoy Mortgage. He can be reached at 801-381-5757 [spencer.haymond@gmail.com]

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112
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YsGuy.com & DeanoDean, Inc. make no representations as to accuracy, completeness, correctness, current-ness, suitability, or validity of any information on this blog and will not be liable for any errors or omissions in this information or for any losses, injuries, or damages arising from its display or use; including, but not limited to, methane gases, body odor, computer and keyboard rage, and sleepless nights. All blog posts are the constantly changing opinions of the author(s) and may occasionally contain bad opinions. They are not approved to diagnose, treat, cure or prevent any disease. Please make decisions based on advice of competent, licensed professionals.

BlackBerry or CrackBerry? Top 10 reasons I love my BlackBerry…

deanodean — Mon, 16 Nov 2009 16:11:12 +0000

I love my BlackBerry!

BlackBerry or CrackBerry? Top 10 reasons I love my BlackBerry handheld device:

10) I can blog just about anywhere!

9) Applications from facebook to iHeartRadio to games with more being developed every day.

8– Multimedia player is great for MP3s, or watch movies and videos during down time.

7) Google SMS! Weather, news, sports, business directory all from a quick text message query.

6) Web browsing for business or fun is simple.

5) Calendar keeps me on schedule. Address book has my whole database. Tasks too. All synch with my desktop PC.

4) Text messaging. I was hooked before BlackBerry had voice capability.

3) AutoText is the best! Simplifies typing–which is already fast–and can be customized to my style of speech and phrasing.

2) Email in my pocket! (Corporate email, Gmail, Hotmail, Yahoo! Mail, etc.)

1) BTW, it’s a phone!

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112

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Way to go Google–with Locked Safe Search!

deanodean — Wed, 11 Nov 2009 18:10:55 +0000

Great news! Today on the official Google Blog came the announcement of Locked Safe Search. So often when a search is done on a person’s name, we’ll find inappropriate content for (IMHO) children and adults.

Google now has their strict setting which can be locked for every user profile who’s logged in. (I log in every time I check email and it stays on throughout the day…) Check to be sure your preferences don’t allow an unexpected result to pop up when you’re searching for your kids’ favorite music artists, or actors…

You will need to set the strict search settings on every Google profile in your family. (My wife and I and two of our daughters are all Gmail users and have “profiles”. Yes, Google runs our lives!

The blog has a video how to set it up and it blocks sexually explicit images and text as any good filtering system can.

Kudos to Google!

Here’s another link to the article: http://googleblog.blogspot.com/2009/11/locking-safesearch.html

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112

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Possible Extension of the Homebuyer’s Tax Credit

deanodean — Wed, 04 Nov 2009 22:26:48 +0000

11/5/2009 Update: WASHINGTON (MarketWatch) — The House of Representatives on Thursday approved an extension of jobless benefits and a tax credit for home buyers, sending the measure to President Barack Obama for signature. See http://bit.ly/2jTwPB

Thanks to Cameron from Security Home Mortgage, in Orem for the following information about extending the Home Buyer Tax Credit for BOTH first-time home buyers, and homeowners looking for their next home:

“The House of Representatives has approved legislation that would extend and expand the credit. The House vote comes after the Senate voted yes on Monday night, and while there is more work to be done, word has it that an agreed upon bill should reach President Obama for his signature by the end of this week.

Under the proposal, individuals with income up to $125,000 a year and couples earning up to $225,000 would be eligible for the credit. The extension would cover homes under contract by April 30^th and closed by June 30^th, 2010. And, as predicted, the tax credit will be expanded to non-first time homeowners as well. There are a few tweaks for non-first time homebuyers—the credit is reduced from $8,000 to $6,500, and they must have owned (and I believe lived in) their home for at least five of the past eight years.

Remember, this is NOT final and even if it is approved, it could contain further changes.”

For further questions, please contact Cameron Adams at 801-420-7234 or via email at cameron@securityhomemortgage.com

UPDATE:
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Dean Crandall is a licensed REALTOR with Keller Williams Westfield Real Estate based in beautiful Utah County. He has six successful years of helping clients and friends find and sell homes, land and investment properties.

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112

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Memories with My Living Parents

deanodean — Wed, 28 Oct 2009 16:28:01 +0000

In the past month, two of my friends had to say good bye to a beloved parent (their mothers). Because I’m way closer to 50 than 45 chronologically, my parents are probably closer to departing this life than living another 20 years. In fact, my dad intimated in one of our conversations earlier this month that he doesn’t expect to be with us for another 15 years. They’ve always “been there” and I’m not sure what my life will feel like when their life missions are over.

My point is not to discuss death, but to consider how lucky and blessed I am to have both of my parents still with us on this spaceship we call earth, and their health is still quite good. Granted, they both move a bit more slowly and I have to speak louder to my dad, but that’s the same for me when my girls have to speak up when addressing me!

When we attend funerals of aged loved ones, or struggle with the passing of a younger person, we inevitably recall memories with the departed. It’s good thing how nostalgia and remembrances turn more positive as time goes by. I’ve tried over the last few years to create and allow for great memories with my parents while they are still alive.

Back in the Summer of 2005, my wife and I went with my mom and dad on a tour of the Eastern US to see some of our Country’s and Church’s historical sites. We enjoyed a few days in Boston, Plimoth, and the sites of the revolution. So much history in a wonderfully small geographic area. We walked the streets where Paul Revere and so many others walked and lived. We saw Fenway Park (the Sox were out of town, so no game), the LDS Temple, Harvard, Boston Garden, and lots of graveyards—including the final resting spot of John Hancock—yes THAT one. As we traveled west, we visited Sharon, VT, lunched in Woodstock (yes, THAT Woodstock), explored the “Cradle of the Restoration” in Fayette, NY, strolled the streets of Palmyra, NY where we took in the history of the beginnings of the LDS Church.

We thrilled with the significance of a secluded forest grove south and west of the town center and felt an appropriate reverence there. We enjoyed the Hill Cumorah Pageant. Moving along, we stared at the wonder of Niagara and Horseshoe Falls from the Canadian side where we spent part of a Sabbath. Finally, we enjoyed parts of Ohio experiencing an Amish meal and learning first hand bits and pieces of history as we walked the streets in the restored city of Kirtland.

Earlier this month as I sat visiting with my parents, we reminisced and shared our recollections of that wonderful adventure. It was great to have them with us for a week to share Conference weekend and FISHING!

Yes, I’ve become my Dad, and can’t get enough angling into my system. (Today it’s snowing, and I would be less inclined to break out the gear…) We went to Gooseberry Reservoir up Fairview Canyon Friday (10/2/2009) with my older brother David and we caught more than our limits (but we brought only nine fish home). Beautiful trout (mostly rainbows) which fought all the way in. Man, I have a love of and for PowerBait!

Dad enjoyed that so much that he and I went back Monday to fish Gooseberry in 25-degree weather and wind to catch our limits again. I try to be so cool when I hook a fish; however, I can’t help but exclaim, “I got one!” each time one takes the bait. By observing my father, I think I understand what a boy feels like from the expressions on his face. Excitement; the rush; the fun of bringing in the “big one”.

We met my parents in San Diego two weekends ago with my brother-in-law and his family and one of my younger brothers (Mark). Dad talked about fishing trip the week before. We made more memories as we just spent time together in Coronado to celebrate a belated birthday for Mark.

Each week, I try to make it a point to call my parents because I never want to miss the opportunity of having a meaningful conversation with them. It’s also a great time to express love and gratitude for the life they gave me. There is still so much for me to learn and they have so much to offer. How blessed I am to have them. They are my heroes, my role models for what a man should be and aspire to be.

And when they are gone and we’re the elder generation, I sincerely hope that I’ll be able to enjoy the lingering memories we made together as peers (and as their son). I’m so grateful to make memories with my daughters and wife as well. So many plans and events to anticipate. We have some of our best days ahead!

I hope that the pattern of living each day with a fullness of happiness, and an eagerness to bless the lives of everyone around us will continue. Create the memories and then remember, just remember.

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112

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Adults: Want to go back to School and Retool/Retrain for FREE? Inexpensive ways to upgrade your skills.

deanodean — Tue, 28 Jul 2009 15:28:20 +0000

As the number of unemployed or underemployed adults—young and old—rises, many are considering moving back into the classroom to learn about new career paths and reformat their skill sets. Below are some tips to free or reduced cost retooling.

Scholarships: Many scholarships don’t have age limits meaning anyone may apply for the funds. There are several web sites available which can point seekers to scholarship opportunities. Don McClure (Don.McClure@BankofAmerica.com), a lender friend, sent me two such sites which direct hunters to multiple scholarship prospects (http://fastweb.com and http://supercollege.com). If you’re left handed, there are scholarships out there! Be creative and consider what makes you unique: ethnic, trade, personal interest scholarships can be found. Google.com, Yahoo.com and Bing.com are great search engines to help you refine your quest.

Colleges and Universities: Many local colleges, universities, trade schools, etc., offer scholarships created especially for adults looking to retool and hone their marketable skills. Go to the learning institution’s web site to see what may be offered. Don’t forget to check with the admissions office. For a list of Utah college & university sites, click here.

Employers: Check with your employer to see if there is tuition assistance available to improve what you’re already doing. If you can be a more valuable employee with education—which didn’t end when you walked at graduation so many years ago—it just makes sense to you and to your employer to further your education and add more skills to your portfolio. There’s a chance you could be eligible for greater compensation for extending your skill set where you work now!

Professional and Trade Organizations: Trade organizations at the local and national levels often offer scholarships and grants. You can take advantage of the Internet and search for your local geography and trade specialty. If you’re in a union shop, check with your union leaders to see what opportunities are available. Large corporations often provide training for displaced employees, so check with your human resources department. (I’d check with HR of companies even where I haven’t worked if it’s in the same area of interest.) Finally, local Chambers of Commerce might have additional insights and information about educational and training dollars.

The Government: Today, Uncle Sam (Obama in 2009) and some States may also provide grants to assist in retraining adults. Don told me about http://careeronestop.org and http://opportunity.gov. Take the time to find out what programs, grants or scholarships might best fit your needs and interests as far as careers go.

Your Bottom Line:
With a little research and a little effort, returning to school may be a whole lot easier…and a whole lot cheaper…than you think! Look at it this way; in five years things will be different than they are today no matter what you do. Why not increase the chances for a better future with additional arrows in your quiver?! Education may be a great way to improve your odds of success in the workplace. Good luck!

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112

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Copyright® 2009, DeanoDean, Inc. “Adults: Want to go back to School and Retool/Retrain for FREE? Inexpensive ways to upgrade your skills.”

Being happy is a choice… So choose happy!

deanodean — Tue, 07 Jul 2009 15:18:22 +0000

This morning while listening to an audio book Your Best Life Now by Joel Osteen (for the second time) I heard a truth again which I’ve believed all my life. “Happiness is a choice.” Pastor Osteen expanded on the premise that we choose to be happy or we choose something else. I won’t go into all of what he said because his words suffice. I will share some of my thoughts here though.

Smile
I remember enduring a sales seminar years ago when the trainer shared an insight which hit home for me. He said to the effect: whenever I have a negative thought and I catch myself, I smile and the thought changes. It is still true today for me because I’ve implemented that practice. I recall telling young people about that habit–if I start to think negatively, just smile–and several of them told me they saw me smile while I sat in the front of meetings. Sometimes, I’d smile a lot! Whenever you’re feeling down, or dwelling on something difficult, smile and your perspective will change. Our situation will not immediately change, the problems will still be there, but a smile will change the way you look at the issue and oft times you’ll be able to see or find a solution that wasn’t obvious before.

Look Heavenward
I went to an Anthony Robbins rah rah meeting years ago and thought it was just that…cheering for the sake of cheering. I was wrong. Tony shared wonderful insights of neuro-linguistic programming which I have not even come close to mastering. One take away I picked up works every time it’s tried and my children roll their eyes when I tell them to do it. Mr. Robbins talked about our body language and physiology–the position of our bodies when we’re happy, sad, depressed, etc. Think about when you’re bummed out. Take that thought and ponder on it. Notice how your body will turn very much like the letter “C”… shoulders slumped, head down? We’re working toward the fetal position if we were lying down.

Now try this experiment: sit up straight (comfortably), eyes ahead and pick a spot on the wall in front of you. Move ONLY your eyes UP to a spot about 30-to-45 degrees above that spot you originally picked–I usually choose the intersection of the ceiling and the wall. As we’re focusing our gaze heavenward, it’s physically impossible to frown and mean it! Try and frown. Most people laugh because they truly can’t frown and feel dejected while looking up! I had folks who came to counsel with me for personal reasons… down, depressed, repentant, etc., and we tried this brief exercise. It was miraculous to see them catch the vision that they didn’t HAVE to stay in that state of “sadness”. They could choose to be happy!

Feelings vs Thoughts
When we are controlled by our feelings–which are natural and normal–our life can be a roller coaster. I believe that we are meant to learn how to manage our feelings. In simple terms, feelings lead to thoughts; thoughts generally lead to words and actions. I know that as I control my thoughts, I can manage and direct my feelings. Every self-help guru, master, or expert will encourage us to set big, positive goals. That’s because goal setting helps us focus our thoughts and actions, which in turn can greatly manage and mitigate our feelings which can get in the way of our “success” in our spiritual, business, and personal lives.

Feelings are NOT bad! We need to listen to that warning voice and take comfort in the feelings which soothe us. It’s just as important to not be led by every negative whim that comes along as to not follow every euphoric feeling to take unnecessary risks which might be harmful to our spiritual, temporal, or personal well being! We’ll find great happiness in blending our feelings and thoughts to make great choices in our lives which lead to happiness.

Don’t wait for happiness!
We can choose to be happy today! We need to be happy with the situations in which we find ourselves every day. As we get good at being happy in our current state, we will be ready for the new levels of happiness which await us when we’re married, divorced, accepted into a program, done with schooling, employed, rich, etc. [you fill in the blank]. If happiness is a choice, and I know that it is, you can choose to be happy even if [again, you fill in the blank].

Live after the manner of happiness!
I believe that for the long haul, we can’t expect happiness in life if we don’t keep natural laws (defined as laws which govern all of nature). If we’re stealing to get rich, we’ll eventually be caught and reap the rewards of the seeds we’ve sown.

When we plant good seeds (e.g. work, love, kindness), we will ultimately enjoy the fruit of those seeds. And there’s a wonderful law of the harvest we can count on: if we plant carrots, we will NOT get oranges! We’ll get exactly the appropriate fruit based on the seeds we plant.

Make the choice!
Being happy is a choice. How often have we gone to comfort someone only to come away benefited because of the sufferer’s joyful attitude? We need to practice the right kinds of habits which can increase our happiness.

We should smile more. When we do, life is just so much better. We should look up (heavenward) more often because changing our physiology can make the difference from feeling down or feeling invigorated. We should focus our thoughts in positive directions which will help us control the feelings which ebb and flow like the tides of the seas. We truly have more control than we think we do.

Don’t wait for something to happen, make it happen! We can be happy every day and I sincerely hope you’ll CHOOSE happiness!

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112

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Up American Fork Canyon…Fishing Tibble Fork—Am I Becoming My Dad?

deanodean — Mon, 15 Jun 2009 21:21:53 +0000

I’m excited for the summer season because I love to fish in warmer weather. (I’ve never had strong desires to ice fish Strawberry Reservoir in February!)

I “discovered” Tibble Fork Reservoir up American Fork Canyon last spring when my dad came into town from out of state and we wanted to do some quick fishing…

The discovery was not the decent number of fish you can catch, but the fact that from my Lehi neighborhood to getting my line wet is about 20 minutes! The fishing is good too–early as the sun rises and just before dusk. This past Saturday (June 13, 2009) I pulled in five little rainbow trout in a 1/2 hour window. It was really fun! Most of what I do is catch & release.

The best part is being there with my 80-year-old father and watching him catch and land the trout. After he returned home last summer, I kept going back to Tibble Fork and back again. It has not disappointed this spring either.

There’s something very good about being in a beautiful natural setting, away from mobile phone coverage and the worries of our lives.

In some ways I have become like my dad, able to escape for a moment–especially when there’s a tug on the line!

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112

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Facts about the $8,000 First-Time Home Buyer Tax Credit

deanodean — Sat, 14 Mar 2009 15:44:09 +0000

Thanks to Axiom Financial for this analysis and explanation. This is great information. Please contact your lending professional or Dean for an introduction to a professional who will take great care of you whether you’re buying or just have additional questions.

In 2008, Congress enacted a $7500 tax credit designed to be an incentive for first-time homebuyers to purchase a home. The credit was designed as a mechanism to decrease the over-supply of homes for sale.

For 2009, Congress has increased the credit to $8000 and made several additional improvements. This revised $8000 tax credit applies to purchases on or after January 1, 2009 and before December 1, 2009.

Tax Credits — The Basics

1. What’s this new homebuyer tax incentive for 2009?

The 2008 $7500, repayable credit is increased to $8000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009.

2. Who is eligible?

Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase.

3. How does a tax credit work?

Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 – $8000 = $1500)

4. So what happens if the purchaser is eligible for an $8000 credit but their entire income tax liability for the year is only $6000?

This tax credit is what’s called “refundable” credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference between $8000 credit amount and the amount of tax liability. ($8000 – $6000 = $2000) Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year.

5. How does withholding affect my tax credit and my refund?

A few examples are provided at the end of this document. There are several steps in this calculation, but most income tax software programs are equipped to make that determination.

6. Is there an income restriction?

Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000.

7. How is my “income” determined?

For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return. AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements. AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040.

8. What if I worked abroad for part of the year?

Some individuals have earned income and/or receive housing allowances while working outside the US. Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI.

9. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit?

Not always. The credit phases-out between $75,000 – $95,000 for singles and $150,000 – $170,000 for married filing joint. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return).

For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown:

Couple’s income $165,000

Income limit 150,000

Excess income $15,000

The excess income amount ($15,000 in this example) is used to form a fraction. The numerator of the fraction is the excess income amount ($15,000). The denominator is $20,000 (specified by the statute).

In this example, the disallowed portion of the credit is 75% of $8000, or $6000

($15,000/$20,000 = 75% x $8000 = $6000)

Stated another way, only 25% of the credit amount would be allowed.

In this example, the allowable credit would be $2000 (25% x $8000 = $2000)

10. What’s the definition of “principal residence?”

Generally, a principal residence is the home where an individual spends most of his/her time (generally defined as more than 50%). It is also defined as “owner-occupied” housing. The term includes single-family detached housing, condos or co-ops, townhouses or any similar type of new or existing dwelling. Even some houseboats or manufactured homes count as principal residences.

11. Are there restrictions on the location of the property?

Yes. The home must be located in the United States. Property located outside the US is not eligible for the credit.

12. Are there restrictions related to the financing for the mortgage on the property?

In 2009, most financing arrangements are acceptable and will not affect eligibility for the credit. Congress eliminated the financing restriction that applied in 2008. (In 2008, purchasers were ineligible for the $7500 credit if the financing was obtained by means of mortgage revenue bonds.) Now, mortgage-revenue bond financing will not disqualify an otherwise-eligible purchaser. (Mortgage revenue bonds are tax-exempt bonds issued by a state housing agency. Proceeds from the bonds must be used for below market loans to qualified buyers.)

13. Do I have to repay the 2009 tax credit?

NO. There is no repayment for 2009 tax credits.

14. Do 2008 purchasers still have to repay their tax credit?

YES. The $7500 credit in 2008 was more like an interest-free loan. All eligible purchasers who claimed the 2008 credit will still be required to repay it over 15 years, starting with their 2010 tax return.

Some Practical Questions

1. How do I apply for the credit?

There is no pre-purchase authorization, application or similar approval process. All eligible purchasers simply claim the credit on their IRS Form 1040 tax return. The credit will be reflected on a new Form 5405 that will be attached to the 1040. Form 5405 can be found at www.irs.gov.

2. So I can’t use the credit amount as part of my downpayment?

No. Congress tried hard to devise a mechanism that would make the funds available for closing costs, but found that pre-funding would require cumbersome processes that would, in effect, bring the IRS into the purchase and settlement phase of the transaction.

3. So there’s no way to get any cash flow benefits before I file my tax return?

Yes, there is. Any first-time homebuyers who believe they are eligible for all or part of the credit can modify their income tax withholding (through their employers) or adjust their quarterly estimated tax payments. Individuals subject to income tax withholding would get an IRS Form W-4 from their employer, follow the instructions on the schedules provided and give the completed Form W-4 back to the employer. In many cases their withholding would decrease and their take-home pay would increase. Those who make estimated tax payments would make similar adjustments.

Some “Real World” Examples

1. What if I purchase later this year but can’t get to settlement before December 1?

The credit is available for purchases before December 1, 2009. A home is considered as “purchased” when all events have occurred that transfer the title from the seller to the new purchaser. Thus, closings must occur before December 1, 2009 for purchases to be eligible for the credit.

3. I haven’t even filed my 2008 tax return yet. If I buy in 2009, do I have to wait until next year to get the benefit of the credit?

You’ll have a helpful choice that might speed up the process. Eligible homebuyers who make their purchase between January 1, 2009 and December 1, 2009 can treat the purchase as if it had occurred on December 31, 2008. Thus, they can claim the credit on their 2008 tax return that is due on April 15, 2009. They actually have three filing options.

If they purchase between January 1, 2009 and April 15, 2009, they can claim the $8000 credit on the 2008 return due on April 15.

They can extend their 2008 income-tax filing until as late as October 15, 2009. (The IRS grants automatic extensions, but the taxpayer must file for the extension. See www.irs.gov for instructions on how to obtain an extension.)

If they have filed their 2008 return before they purchase the home, they may file an amended 2008 tax return on Form 1040X. (Form 1040X is available at www.irs.gov)

Of course, 2009 purchasers will always have the option of claiming the credit for the 2009 purchase on their 2009 return. Their 2009 tax return is due on April 15, 2010.

4. I purchased my home in early 2009 before the stimulus bill was enacted. I claimed a $7500 tax credit on my 2008 return as prior law had permitted. Am I restricted to just a $7500 credit?

No, you would qualify for the $8000 credit. Eligible purchasers who have already claimed the $7500 credit on a 2008 return for a 2009 purchase may file an amended return (IRS Form 1040X) for the 2008 tax year. This amended return will enable them to obtain the additional $500 credit amount.

5. If I claim my 2009 $8000 credit on my 2008 tax return, will I have to repay the credit just as the 2008 credits are repaid?

No. Congress anticipated this confusion and has made specific provision so that there would be no repayment of 2009 credits that are claimed on 2008 returns.

6. I made an eligible purchase of a principal residence in May 2008 and claimed the $7500 credit on my 2008 tax return. My brother, who has never owned a home, wishes to purchase a partial interest in the home this spring and move in. Will he qualify for the $8000 credit, as well?

No. Any purchase of a principal residence (or interest in a principal residence) from a related party such as a sibling, parent, grandparent, aunt or uncle is ineligible for the tax credit. Since you and your brother are related in this way, he cannot qualify for the credit on any portion of the home that he purchases from you, even if he is a first-time homebuyer.

7. I live in the District of Columbia. If I qualify as a first-time homebuyer, can I use both the $5000 DC credit and the $8000 credit?

No; double dipping is not allowed. You would be eligible for only the $8000 credit. This will be an advantage because of the higher credit amount, plus the eligibility requirements for the $8000 credit are somewhat more easily satisfied than the DC credit.

8. I know there is no repayment requirement for the $8000 credit. Will I ever have to repay any of the credit back to the government?

One situation does require a recapture payment back to the government. If you claim the credit but then sell the property within 3 years of the date of purchase, you are required to pay back the full amount of any credit, including any refund you received from it. A few exceptions apply. (See below, #24). Note that this same 3-year recapture rule applies, as well, to the $7500 credit available for 2008. This provision is designed as an anti-flipping rule.

9. What if I die or get divorced or my property is ruined in a natural disaster within the 3 years?

The repayment rules are eased for many circumstances. If the homeowner who used the credit dies within the first three years of ownership, there is no recapture. Special rules make adjustments for people who sell homes as part of a divorce settlement, as well. Similarly, adjustments are made in the case of a home that is part of an involuntary conversion (property is destroyed in a natural disaster or subject to condemnation by eminent domain by an authorized agency) within the first three years.

10. I have a home under construction. Am I eligible for the credit?

Yes, so long as you actually occupy the home before December 1, 2009.

WITHHOLDING EXAMPLES:

Note: The impact of estimated tax payments would be the same.

Situation 1: Sally plans her withholding so that her withholding is as close as possible to what she anticipates as her income tax liability for the year. When she fills out her 1040, her liability is $6000. She has had $6000 withheld from her paycheck. She also qualifies for the $8000 homebuyer credit.

Result: Sally’s withholding satisfies her tax liability and reduces it to zero. She will receive a refund of the full $8000.

Situation 2: Nick and Nora file a joint return. Nick is self-employed and makes estimated payments; Nora has taxes withheld from her salary. When they compute their taxes, their combined withholding and estimated tax payments are $11,000. Their income tax liability is $9800. They also qualified as first-time homebuyers and are eligible for the $8000 refundable tax credit.

Result: Ordinarily, their combined estimated tax payments and withholding would make them eligible for a refund of $1200 ($11,000 – $9800 = $1200). Because they are eligible for the refundable tax credit as well, they will receive a refund of $9200 ($1200 income tax refund + $8000 refundable tax credit = $9200)

Situation 3: Cesar and LuzMaria both have income taxes withheld from their salaries and file a joint return. When they file their income tax return, their combined withholding is $5000. However, their total tax liability is $7200, generating an additional income tax liability of $2200 ($7200 – $5000). They also qualify for the $8000 first-time homebuyer tax credit.

Result: Cesar and LuzMaria have been under-withheld by $2200. Ordinarily, they would be required to pay the additional $2200 they owe (plus any applicable interest and penalties). Because they are eligible for the refundable homebuyer tax credit, the credit will cover the $2200 additional liability. In addition, they will receive an income tax refund of $5800 ($8000 – $2200 = $5800). If they owed penalties and/or interest, that amount would reduce the refund.

If you are looking for free advice or have questions, please contact Dean directly:

Dean Crandall
801-836-3112

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