Get Off the Fence for the Tax Credit

The Federal government has put all the pieces together for an incredible Buyer Assistance Program that you can package and market.

The tax advantages of home ownership allow the owner to deduct the property taxes and interest which lowers their monthly cost of housing. An adjustment can even be made to a taxpayer´s W4 so that more deductions are withheld to realize a higher paycheck throughout the year to balance the deduction of the interest and property taxes when their return is filed.

When the homeowner sells the property, they´re entitled to the exclusion of up to $250,000 or $500,000 in gain based on specific circumstances. What a great deal: live in a home, enjoy it, and avoid tax on the money you make too.

The First-time home buyer´s tax credit is a fantastic opportunity that basically subsidizes the down payment itself. It may be the chance of a lifetime for the people who are eligible because they must close the sale of their new home by 11/30/09 to qualify. The clock is ticking.

 

Answer these questions:

 

Are you married and is your modified adjusted gross income less than $150,000?

 

Have you and your spouse had NO home ownership in the past three years?

 

Do you plan to stay in the new home for at least three years?

If you answered Yes to all three of these questions, you may be eligible for the $8,000 first-time buyers tax credit.

 

Reasons to Buy NOW

  • First-time buyers get up to an $8,000 tax credit that doesn't have to be repaid
  • Tax savings, appreciation, and amortization dramatically reduce the monthly cost of ownership
  • Selection of homes is excellent giving you a greater opportunity to find the home you want
  • Interest rates are lower than they've been in 50 years allowing you a lower cost of ownership
  • New lending regulations since 7/1/09 make closings a 45 day minimum to 60 days. Don't wait and miss the November 30, 2009 dead line.

This is a revision of the tax credit first established in 2008. A very important change is that if the home is purchased between January 1, 2009 and December 1, 2009, the tax credit doesn't have to be repaid. However, if the home ceases to be their principal residence within three years of purchase, the tax credit must be completely recaptured. This would include converting the home to rental property.

Many people don't understand the significance between a tax deduction and a tax credit. A tax deduction reduces income subject to tax but a tax credit is a dollar for dollar reduction in tax liability. An $8,000 tax deduction would result in $2,240 tax savings for a 28% taxpayer. Whereas an $8,000 tax credit would result in $8,000 in tax savings for the same 28% taxpayer.

 

For more information, see Form 5405 available on www.IRS.gov. This information is not intended to substitute for professional tax advice.

 

While credit requirements are much tighter now, the interest rates are the lowest they´ve been in 50 years. People who can qualify take advantage of this variable that affects cost of ownership as much as the price. It is imperative that a buyer make a loan application at the very beginning of this process.

 

There several other things to improve the financing which include concessions by the seller that can be used to pay closing costs or buy down interest rates. Reducing the amount of money it takes to get into a home initially and the monthly payments can be a great incentive to getting a buyer off the fence and acting now.

The professional advice of a knowledgeable agent is more important than ever before. There is so much conflicting information in the media and from people in general that it literally paralyzes potential buyers. Committed professionals are willing to take the time to learn the current tax laws, financing alternatives, and skills it takes to communicate them.

 

Contact Ivan Brehmer, CRS to see a way to secure a piece of the American dream with Buyer Assistance that may not be available together again as they are today.