As promised below is an overview and comparison between the present Tax Credit and the New.
The information below was just given to us by Senator Dodd's Office.
Homebuyer Tax Credit Overview:
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First‐time homebuyers (those who have not owned a principal residence in the three years prior to the purchase date of their subsequent home) are eligible for a refundable tax credit of 10 percent of the purchase price of a principal residence up to $8,000 for homes bought between January 1 and December 1, 2009.
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If the home is sold within three years, the taxpayer must pay back the credit (called "recapture").
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Income limits for the current credit are $75,000 for single filers and $150,000 for joint filers, phasing out completely after $95,000 for individuals and $170,000 for couples. Income limits are based on Modified Adjusted Gross Income (MAGI).
Extended and Expanded Homebuyer Tax Credit:
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Extends the availability of the $8,000 first‐time homebuyer credit to taxpayers who have a principal residence under a binding contract before April 30, 2010, allowing 60 days to close.
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Creates a new $6,500 credit for move‐up buyers. Move up buyers are defined as people who haveLike the credit for first‐time buyers, lived in their current home for 5 or more consecutive years during the 8 year period ending on the date of purchase of the their subsequent principal residence. this credit is available to taxpayers who have principal residences under a binding contract before April 30, 2010, allowing 60 days to close.
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Raises the income limits for both the first time and move‐up buyer to $125,000 for single filers, $225,000 for joint filers with a $20,000 phase‐out. The $20,000 phaseout means that no credit can be claimed by those with MAGI above $145,000 for single filers, $245,000 married joint filers.
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Both the first‐time and move‐up credit are available for principal residences with a purchase price up to $800,000. Purchase price is defined as the adjusted basis of the principle residence on the date such residence is purchased.
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Includes strong anti‐fraud provisions:
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Gives the Internal Revenue Service math error authority which they have requested when processing IRS form 5405. This would allow the IRS to correct certain errors during credit processing, and avoid the need for a post‐refund, labor intensive audit.
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Requires a copy of the settlement statement (HUD‐1) which would verify the date of purchase, the residence address, and the purchase price.
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Introduces an explicit age limitation, allowing no one under 18 to claim the credit
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Excludes individuals who are claimed as dependents and married individuals who purchase the home from the family of their spouse from claiming the credit
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Eliminates the recapture requirement for military personnel and members of the Foreign Service and intelligence community who are forced to sell their homes within three years as a result of an official extended duty of service. In addition, these individuals have one additional year to qualify for the credit if they served for at least 90 days outside the U.S. in 2009 or 2010.
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Purchases made in 2010 can be claimed on the 2009 tax return.
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The score of $10.8 billion over 10 years is paid for by a seven year delay of the worldwide allocation of interest rule until 2017, not stimulus funds.
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Effective after the date of enactment.
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Homebuyers who were eligible for the first‐time homebuyer tax credit pre‐WHBAA will be able to continue to claim the credit. Homebuyers who qualify for the credit under the expanded terms will only be able to claim the credit if they close on their home purchase after the date of enactment of this bill (the binding contract can be signed before enactment).
Some of this, like any new Legislation, is going to take a few days to fully understand. As further clarification is made available I will try to provide it.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
George,
Great blog, great information breaking it down. I will book mark to re-blog later today if that is okay by you and print it off to. You really laid it out well. I hope you have a great day friend and a great weekend!! :)
Good news from where I sit. Alot of agents would have preferred to see the Credit go "bye-bye", but I like so many others think the credit extension and expansion are really need at this time to keep inventories under control.
Thank you George. I have bookmarked this to go back over it later when i have the time. We are spoiled by you, for you have become our one stop shop person for mortgage news - no need to go anywhere else!
Debbie, yes it is. We have also been told that the President has signed the Bill.
Tom the word is that they will not extend it again, so this is it.
Diane, I try to keep up with what is going on, and something like this is easy because of all the attention it has been getting that and the contacts that we have.
George,
Thanks fo the heads-up!
I wounder how many buyers making less than $125,000.00 can afford an $800,000.00 house? It seems to me they'd need 50% or more down.
This one got by me what is the "worldwide allocation of interest rule"? I Googled this and got two hits, your blog and one other, with no explanation of what we're being spared, temporally.
Bill
I rarely re-blog but I plan to re-blog this. Does it go in to affect immediatly?
I have one other question. I have some clients who are moving down mainly to get a lower tax rate. Would they be exempt since they are buying less of a home than the one they are in.
George,
Everybody must like the improved anti-fraud provisions. The old rules were obviously too relaxed and invited way too much abuse.
George,
I think they should go back and get the fraudulent ones from the other credits....
Ann Hayden in Wildwood, MO
Bill, good question I wish I had an answer.
Marchel, I have not seen anything that says that the house they are purchasing has to be more expensive than the one they presently have. But I am sure that will be something that will be clarified in the next few weeks.
Esko, extra anti-fraud provisions were needed, but I am sure that there will be those who will manage to find away around them.
Ann I am all for that. They should be treated like any other thief.
George............. how's things going??? I have not been by here for SOOooo long.....
I am still subscribed to your blog too!!!
Are you a member of,"Christianity and Real Estate"????
I forget if you ever joined.....
Do i have to go and look?
;-)
Great summary George. No surprise that they finally got it done. Hopefully it gets a few off the fence and into a new home.
Alex, nice to see YA. Yes I do believe that I joined your group way back when you started it.
Bill it do that, but I am also certain that we are going to have a lot existing homeowners complaining that they Closed just before this Bill went into affect and they can't get the $6,500.
YAY GEORGE! Another great post full of good info for consumers.
Thank you.
Judi, thank you!
Good news for lots of people. We will now have to focus on getting the information out to our clients and business partners. It should be a busy winter and esrly spring
Phil it has been a busy Fall, and I hope that you are right about it continuing into the Winter and Spring.
George,
I really thought that is what the IRS was supposed to be doing keeping track of the legitimate deals...
Ann Hayden in warm Wildwood, MO
I love your defined explanation of the credit....this will help many....and it helped me understand more :)
Nice summary of the new changes and the qualifications. Whether we are for it or against it... we still need to know it.
Ann, you should know by now that what is suppose to be done, and what is done, are usually two very different things. They have add more anti-fraud measures, but now lets see it they actually do anything with them.
Sally there are going to be a lot of questions that fall in between the cracks and that no one might have taught of yet, in particularly with the $6,500 tax credit for existing homeowners.
Paul very well stated. It does not matter if we agreed with it or not, we need to be up on it if we are going to provide the best service that we can to our clients.
George.. Thanks for the NEWS FLASH, I can always rely on you for up-to-date information, and getting it to us quickly. Job well done.
Valerie, I am sure a lot more information will be coming down clarifying a lot of this, and I will try to post it as I get it.
George,
I think they should hire me to check the documents.. I would be diligent in checking them.
Ann
Ann you would have my vote for the job :)
George,
I wonder how many more I would need to get the job....
Ann
George this is good news for the mortagage and real estate industries. Here is hoping this is going to a very busy winter.
George this is good news for the mortagage and real estate industries. Here is hoping this is going to a very busy winter.
Ann, maybe we should start a campaign for that ........... LOL
Jennifer that would be very very nice :)
George,
I would really love this job...
Ann