Guide to the Extended and Expanded Tax Credit

Tax Credit Guide

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Tonight’s Speaker

Chris WilliamsonMortgage Advisor - Mortgage California

Phone: (650) 520-0915

www. SanMateoMortgageBlog.com

Questions During the Webinar

• Financing experts are available to answer questions throughout the presentation

• This is an interactive learning environment. You will

Chris Williamson [email protected] Phone: (650) 520-0915

• This is an interactive learning environment. You will get the most value from this program by having your specific questions answered.

• We welcome all of your questions

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Guide to the Extended and Expanded Tax Credit

Chris E. Williamson

Mortgage Advisor

Phone: (650) 520-0915

Email: [email protected]

Blog: www.SanMateoMortgageBlog.com

Purpose & Goals of the Webinar

Purpose

• Help You Learn What the New Credit Means to You as a Home Buyer


Goals

• Understand How You Can Use the Tax Credit

• Answer Any Questions You Have About the Credit

Overview

• What is a Tax Credit?

• Biggest Changes for 2010

• Who is Eligible?


• Who is Eligible?

• How Much Do I Get?

• FAQs

• How to Claim Credit

• Realities of the Market

What is a Tax Credit?

• Dollar for dollar reduction in the amount of taxes you owe the IRS


Example

Amount Owed in Annual Taxes $10,000

- Credit -$8,000

Remainder Owed to IRS $2,000

What Happens if I Owe No Taxes?

• IRS will issue you a check for amount of credit

• You will also receive any other rebate owed to you by the IRS


by the IRS

Biggest Changes for 2010

• First Time Homebuyer Tax Credit extended to

June 30, 2010

• Income Limits for First Time Home Buyers Raised


• Income Limits for First Time Home Buyers Raised

• Now Includes Existing Home Owners Who Want to Buy a New Primary Residence

Who is Eligible?

First Time Home Buyers

• Single tax payers

• Married couples filing jointly or separately


• Married couples filing jointly or separately

Who is Considered a First Time Buyer?

• Have never owned a home

• Have not owned a primary residence in past 3 years

• Currently own a 2nd home or investment property


• Currently own a 2nd home or investment property but haven’t owned a primary residence in 3 years

Who is Eligible?

Existing Home Owners

• Single tax payers

• Married couples filing jointly or separately• Married couples filing jointly or separately

Who is a Qualified Purchaser?

Existing home owners are eligible for a credit if…

• Owned & occupied the same primary residence for a period of 5 consecutive years during the last 8 years


period of 5 consecutive years during the last 8 years

• Purchase a new primary residence

Who Gets What?

First Time Home Buyers

• 10% of the purchase price of the home

• Max available tax credit of $8,000



Existing Home Owners


Married Filing Separately

• First time home buyers

▫ Each party can claim up to $4,000

• Existing home owners


• Existing home owners

▫ Each party can claim up to $3,200

Income Limits for Single Filers

• Eligible for Full Credit with up to $125,000 Annual Gross Income

▫ Up from 2009 limit of $75,000



• Phases Out if you Make More than $125,000

• Not Eligible if you Make $145,000 or More

Income Limits for Married & Joint

• Eligible for Full Credit with up to $225,000 Combined Annual Gross Income




• Phase Out with more than $225,000 of Combined Annual Gross Income

• Not Eligible if you Make $245,000 or More

New Deadlines

• New Extension went into effect November 7, 2009

• All contracts must be ratified on or before

April 30, 2010


April 30, 2010

• All transactions must be closed on or before

June 30, 2010

Military Extension

• Special extension for extended duty armed forces

▫ Military, Foreign Services, Intelligence

• Out of Country for at least 90 days between Dec. 31,


• Out of Country for at least 90 days between Dec. 31, 2008 and May 1, 2010

• Eligible for a 1 year extension for the tax credit

▫ In contract on or before May 1, 2011

▫ Close on or before June 30, 2011

Maximum Purchase Price

• Old Rules – No limits on purchase price

• New Rules - $800,000 maximum sales price


Credit Have to Be Repaid?

• Credit Does Not have to be Repaid Unless:

▫ Home is no longer your primary residence at any time during the first 36 months (3 years)


any time during the first 36 months (3 years)

Claim Credit in Advance?

• Not possible to claim tax credit in advance

• IRS has recently begun prosecuting people who have claimed the credit and then the purchase did not


claimed the credit and then the purchase did not take place

What About Seller Financing?

If purchasing a property with seller financing where the seller retains title to the property you can still claim the credit….if


the credit….if

• You demonstrate ownership of the property

Demonstrate Ownership By• Right of possession

• Right to obtain legal title upon full payment of purchase price


purchase price

• Right to construct improvements

• Obligation to pay property taxes

• Responsibility to insure the property

• Duty to maintain the property

Purchase from a Step Relative?

• Purchasing from “step relatives” does not make you ineligible for the credit

• Cannot purchase from a direct blood relative


• Cannot purchase from a direct blood relative

Non-Occupant Co-Borrowers

Home Buyer is Still Eligible if…

• Co-borrower is a parent

• Parent must not live in the home


• Parent must not live in the home

• Home buyer meets other requirements of credit

Other Restrictions

• According to the IRS, a credit will not be due if:

▫ Buy a home from a close relative� Spouse, parent, grandparent, child or grandchild


� Spouse, parent, grandparent, child or grandchild

▫ Home is not your primary residence

▫ Sell your home within 1 year of purchase

▫ You are a nonresident alien

▫ Owned primary residence at any time during the 3 years prior to the date of new purchase

Other Restrictions▫ You are, or were, eligible to the claim the District of Columbia first time home buyer credit for any taxable year


� Doesn’t apply for home purchased in 2009

▫ Financing comes from tax-exempt mortgage revenue bonds� Doesn’t apply for home purchased in 2009

Claiming the Credit

• Homes Purchased in 2009

▫ Claim on 2009 return (Form 1040) or amended 2008 return with form 5405


return with form 5405 � (http://www.irs.gov/pub/irs-pdf/f5405.pdf)

• 2010 Home Purchases

▫ Claim on 2010 return or amended 2009 return

• Possible to adjust W-4 witholdings in anticipation of 2010’s credit

• Copy of HUD-1

Claiming the Credit

• 2010 Home Purchases

▫ Claim on 2010 return or amended 2009 return

• Copy of HUD-1


• Copy of HUD-1

• Possible to adjust W-4 withholdings in anticipation of 2010’s credit

• Speak to a Tax Advisor before doing this!

Realities of the Market

• Heading into one of the best times to buy

▫ November, December, January

▫ Less competition in all price levels


▫ Less competition in all price levels

• Interest Rates are at their Lowest Levels in Years

• Short sales can take months to complete

▫ Plan to be in contract as soon as possible

▫ If you don’t close in time (June 30th, 2009) – no credit

Realities of the Market

• Current inventory of homes below $800,000 in short supply

• Pace of sale of most affordable homes expected to


• Pace of sale of most affordable homes expected to increase

• Extended, increased loan limits of $729,750

▫ Money is available

• Spring buying season expected to

start earlier than normal

Resources You Can Use at Home


SanMateoMortgageBlog.com


Financing Questions?http://sanmateomortgageblog.com/mortgage-financing-question/


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Chris Williamson


Chris Williamson

Phone: (650) 520-0915

Email: [email protected]

www.SanMateoMortgageBlog.com

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Guide to the Extended and Expanded Tax Credit