Show All » 2009 » May
Monday, May 04, 2009$1,500 Tax Credit for Home Energy Improvements:
Individuals are allowed a nonrefundable personal credit, up to $1,500 of aggregate credits, for improvements to their principal residence in 2009 and 2010 that meet certain energy efficiency standards. The credit is equal to 30% of the sum of amounts paid or incurred during the tax year for (1) energy efficiency improvements to the building envelope and (2) residential energy property expenditures, i.e., expenditures for qualified energy property (Windows and Furnaces are just a few types of expenditures).
For a good resource of what qualifies go to : energystar.gov/taxcredits
Greg Nelson, CPA, MBT
Olsen Thielen CPAs
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Show All » 2009 » March
Thursday, April 16, 2009First-Time Homebuyer Credit: Scenarios - IRS issues FAQ Bulletin
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Show All » 2009 » March
Saturday, March 21, 2009
Moving Up
Afraid to move up in this market? Learn the math behind buying a home at a great price and with a great interest rate!
Take advantage of the opportunities to enhance your current financial stability in today’s low mortgage interest rate environment by joining us for our upcoming seminar and Q&A forum.
Topics include: • Eye-opening financial benefits of buying a home
• Pricing and preparing your home to sell in this market
• How a loss on your sale may be recouped with a good buy
• Cost effective services to rent and manage your home if it doesn’t sell
Tuesday, March 31 at 6:30 p.m, Cornerstone Mortgage Company -
436 Gateway Blvd., Burnsville, MNFeatured Speakers include:
Ronny Loew - MN Home Loan Partners
John Stenroos - MN Real Estate Team
Greg Nelson - Olsen Thielen CPA
Lisa Atkinson - Set to Show Homes
Nina Haugen - NTH Enterprises
Free admission. Just bring this flyer,
RSVP to Sandra Loew| 952.808.0042 or sloew@houseloan.com
This seminar is for informational purposes only. The information discussed may not be wholly or at all applicable to every situatuion. It is recommened that you consult your professional advisor before acting upon this information.
Posted By: Ryan O'Neill @ 5:18:53 PMTop
Show All » 2009 » February
Thursday, March 19, 2009First-Time Homebuyers Have Several Options to Maximize New Tax Credit
News Release 2009-27, 03/18/2009, IRC Sec(s).
As part of the Treasury Department's consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they've already filed their tax return.
The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.
“The new credit can get money in the pockets of first-time homebuyers quickly,” said IRS Commissioner Doug Shulman. “For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they've already filed their tax return.”
First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.
Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000 or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.
The filing options to consider are:
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File an extension. Taxpayers who haven't yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.•
File now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.•
Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.•
Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.
The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.
Compliments of Greg Nelson, CPA - Olson Thielen - ginelson@otcpas.com
Posted By: Ryan O'Neill @ 3:54:33 PMTop
Show All » 2009 » February
Tuesday, March 17, 2009Converting a Home into a Rental Property
You have decided to move to another residence, but find it difficult to sell your present home. One way to weather the soft residential selling market is to rent out your present home until the market improves. If you are thinking of taking this step, you no doubt are fully aware of the economic risks and rewards. However, you also should be aware that renting out your personal residence carries potential tax benefits and pitfalls.
It is recommended that you sit down with your CPA and review together how a rental decision will affect your income and deductions, and your tax breaks as a homeseller. Depending on your situration, you will also have to review how your tax situation will be affected if you eventually sell your home at a loss.
You generally are teated like a regular real estate landlord once you begin renting your home to others. That means you must report rental income on your return, but also are entitled to offsetting landlord-type deductions for the money you spend on utilities, operating expenses and incidental repairs and maintenance (e.g., fixing leak in the roof). Additionally, you can claim depreciation deductions for your home. You can fully offset your rental income with otherwise allowable landlord-type deductions. However, under the tax law passive activity loss (PAL) rules, you may not be able to currently deduct the rent-related deductions that exceed your rental income unless and exception applies. Under the most widely applicable exception, the PA rules won't affect your converted property for a tax year in which your adjusted gross income doesn't exceed $100,000, you actively participate in running the home-rental business, and your losses from all rental real estate activities in which you actively participate don't exceed $25,000.
You should also be aware that potential tax pitfalls may arise from the rental of your residence. Unless your rentals are strictly temporary and are make necessary by adverse market conditions, you could forfeit an important tax break for homesellers if you finally sell the home at a profit. In general, you can escape taxation on up to $250,000 ($500,000 for certain married couples filing joint returnes) of gain on the sale of your home. However, this tax-free treatment is conditioned on your having used the residence as your principal residence for at least two of the five years preceding the sale. So renting your home out for an extended time could jeopardize a big tax break. Even if you don't rent out your home so long as to jeopardize your principal residence exlusion, the tax break you would have gotten on the sale (i.e., exclusion of gain up to the $250,000/$500,000 limits) will not apply to the extent of any depreciation allowable with respect to the rental or buisness use of the home or periods after May 6, 1997. A maximum tax rate of 25% applies to this grain (attributable to depreciation deductions).
Some homeowners who bought at the height of a market may ultimately sell at a loss. In such situations, the loss is available for tax purposes only if the owner can establish that the home was in fact converted permanently into income-producing property, and isn't merely renting it temporarily until he can sell. Here, a longer lease period helps an owner. However, if you are in this sutuation, you should be aware that you propbably won't wind up with much of a loss for tax purposes. That's because basis (cost for tax purposes) is equal to the lesser of actual cost or the property's fair market balue when it's converted to rental property. So if a home was bought for $300,000, converted to rental property when it's worth $250,000, and ultimately sold for $225,000, the loss would only be $25,000.
The question of whether to turn a principal residence into rental property isn't easy to resolve. You should review your situation with your CPA so he/she can guide you to an answer that makes the most sense for you.
Greg Nelson, CPA, MBT - ginelson@otcpas.com
Posted By: Ryan O'Neill @ 5:36:11 PMTop
Show All » 2009 » February
Saturday, February 28, 2009Becoming The Wild West. Don't Go it Alone...
Becoming the Wild West. Don't Go it Alone...
A quick wrap of what is taking place out there in the real estate and mortgage world right now. It's a roller coaster, to say the least. A statement of the obvious for some. But for those who are focusing on the positive news of low rates, low home prices and tax credits as this blog points out, it is also important to understand the realities we are also facing.
All the way from the individual to small and large corporations, even the federal government, everyone is scrambling for solutions. But the more solutions, bailouts and stimuli are rolled out, the more confusion they cause. Those ready to finally take action are questioning their decisions with each new headline.
Yesterday, clients of mine were headed to a closing on a home they had waited for a long time. They originally wrote the offer on a short-sale property in mid-October, 2008. The offer was finally accepted the first week of February but the sellers insisted on closing at the end of the following week, a very fast closing. On closing day, they informed all parties that it was now too fast for them and they needed until the end of the month. Yesterday was the new closing date. We were informed first thing in the morning that the sellers side had filed papers in court to halt the sale and they were seeking to cancel the sheriff's sale and reinstate their mortgage.
After a full day of banter and saber rattling between agents, closers, bank reps and attorneys, the closing went through shortly before 5:00 PM.
It turns out, the sellers and the bank holding their mortgage were concerned that they might be taking an unnecessary loss by proceeding with the short sale when new details are coming out in a week on the new stimulus bill. So they were trying to sabotage the closing.
If I have said it before, I will say it again, NO ONE can afford to go into a real estate transaction in this market without proper representation. The buyer's agent on this purchase saved it from falling apart by knowing the law, knowing what to say and to whom to say it.
Certainly people are trying to save money on the sale of a home by selling For Sale by Owner when they are underwater. Buyers perceive they may save a few bucks if they make an offer directly to the seller and cut real estate commissions. Investors now seeing higher financing costs are paying cash and cutting corners on necessities like title insurance. It is only a matter of time until these savings turn into nightmares.
It is no different in getting mortgage advice. Though it used to be rare to see guideline changes more than a few times a year, this market is bringing change at an alarming rate. Numerous announcements are sent daily announcing sweeping changes taking effect immediately or within days. Those dragging their feet waiting for lower rates are missing the point that appraisal values and changing guidelines may make a drop in rate worthless if they are no longer qualified for the loan.
Bloomberg published a great article about the realities in the mortgage world this week. Even for well qualified borrowers, it can be difficult to get financing right now as banks try to write only the best loans and restore investor confidence in their institutions:
Low Mortgage Rates a Mirage as Fees Climb, Eligibility Tightens (http://www.bloomberg.com/apps/news?pid=email_en&refer=home&sid=a8ta_MEhUZ9E)
It is going to take a while, to say the least, for this crisis to calm down. We believe things will get worse before they get better. So be sure to have the right advisors around you to help protect you and resist the urge to be penny wise, pound foolish.
By Ronny Loew - Ronny is the Next Home Specialist with MN Home Loan Partners. Whether you are moving up, downsizing, relocating, keeping your home as an investment to buy a new primary residence or refinancing, Ronny has specific strategies to make it easy and a financial win. He can be reached at 952-808-2815 or rloew@houseloan.com
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Show All » 2009 » February
Friday, February 27, 2009How to Buy Bank Owned Property Class
Learn from professionals you trust! Whether you are a first-time homebuyer, move -up buyer or an investor, we can help you find the best deals in bank-owned property. Please join us for our complimentary seminar.
Thursday, March 5th
6:30 pm
at
Cornerstone Mortgage Company
436 Gateway Blvd.
Burnsville, MN 55337
Presented by Scott Wollmering and Alec Grebis
of the MN Real Estate Show
To register, please email njunker@minnesotahomes.com or call 952-431-0457
Posted By: Ryan O'Neill @ 3:51:47 PM
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Show All » 2009 » February
Friday, February 27, 2009IRS Releases Revised Form 5405 - First Time Homebuyer Credit
Pre-Recovery Act credit:
Under pre-Recovery Act law, for qualifying purchases of principal residences in the U.S. after Apr. 8, 2008 and before July 1, 2009, eligible first-time homebuyers may claim a refundable tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately).
A taxpayer is considered a first-time homebuyer if he (or spouse, if married) had no present ownership interest in a principal residence in the U.S. during the 3-year period before the purchase of the home to which the credit applies.
Eligible first-time homebuyers who purchase a principal residence after Dec. 31, 2008, and before July 1, 2009, may elect to treat the purchase as made on Dec. 31, 2008. For eligible purchases in 2009, a taxpayer may elect to claim the credit for 2008 or 2009 by attaching Form 5405 to the taxpayer's original or amended 2008 tax return or 2009 tax return.
The first-time homebuyer credit phases out for individual taxpayers with modified AGI between $75,000 and $95,000 ($150,000-$170,000 for joint filers) for the year of purchase.
The credit for new homebuyers is recaptured ratably over fifteen years, with no interest charge, beginning with the second tax year after the tax year in which the home is purchased. For each tax year of the 15-year recapture period, the credit is recaptured as an additional income tax amount equal to 6⅔% of the amount of the credit. This repayment obligation may be accelerated or forgiven under certain exceptions.
In other words, the credit for new homebuyers is the equivalent of a long-term interest-free loan from the government.
Recovery Act enhancements to the credit:
For residences purchased after 2008,
1) increases the maximum homebuyer credit to $8,000.
2) extends the credit so that it applies to purchases before Dec. 1, 2009.
3) correspondingly, for purposes of the election to treat the purchase of a principal residence as having been made on Dec. 31, 2008, extends the last date of purchase has until Nov. 30, 2009.
4) generally waives the recapture of the credit for qualifying home purchases after Dec. 31, 2008. However, if the taxpayer disposes of the home or the home otherwise ceases to be the principal residence of the taxpayer within 36 months from the date of purchase, the pre-Recovery Act rules for recapture of the credit apply.
Note: The waiver of the recapture applies without regard to whether the taxpayer elects to treat the purchase in 2009 as occurring on Dec. 31, 2008.
Form 5405.
Form 5405 is fairly straightforward. Part I A calls for the address of the home qualifying for the credit while Part I B asks for the date it was acquired. A box must be checked on Part I C if the taxpayer is choosing to claim the credit for a home bought in 2009.
1) Specifically, Part I C calls for the box to be checked “if you are choosing to claim the credit on your 2008 return for a main home bought after December 31, 2008 and December 1, 2009.” Thus, Form 5405 reflects the Recovery Act change making this option available for a main home bought Dec. 31, 2008 and before Dec. 1, 2009.
2) The election effectively allows eligible first-time homebuyers who make a timely purchase in 2009 to claim the credit on their 2008 returns rather than on their 2009 returns. Thus, in some cases, an individual or couple may be able to get a refund of the credit shortly after the purchase closes and use the refund to pay off a short-term bridge loan that was obtained to help with closing costs.
TAX PLANNING: A taxpayer(s) whose 2009 qualifying home purchase will be completed after the Apr. 15, 2009 due date for filing the 2008 return should considering getting an automatic six-month filing extension if they would otherwise have to pay tax by the Apr. 15 due date and they are virtually certain to complete the purchase within the extended due date. The credit will be available to offset the tax they otherwise would have had to pay by the regular due date. If the credit won't be sufficient to completely offset the tax, they will have to pay the shortfall with their extension request. This approach should not be undertaken if the home purchase could fall through.
Part II of Form 5405 has six line entries for computing the credit. The maximum credit is computed on line 1 as the smaller of $7,500 ($8,000 for a home purchased in 2009) or 10% of the purchase price of the home. Lines 2 through 5 deal with the phase out rules. The ultimate amount of the credit is entered on line 6.
Note: The parenthetical language containing the $8,000 figure for 2009 purchases on the revised 2008 Form 5405 thus makes it clear that a qualifying 2009 purchaser who elects to claim the credit on his 2008 return is not limited to a maximum credit of $7,500 but rather can take advantage of the increased maximum credit of $8,000.
The instructions to Form 5405 explain the rules for repaying the credit. There are separate discussions of the rules for homes purchased in 2008 and those for home purchased in 2009. The latter reflect the Recovery Act change generally waiving the recapture of the credit for qualifying home purchases after Dec. 31, 2008.
Note: Inclusion of the relaxed recapture rules for 2009 purchases on the 2008 Form 5404 thus makes it clear that IRS agrees that a 2009 purchaser who elects to treat the purchase as occurring on Dec. 31, 2008 gets the benefit of the relaxed recapture rules.
Posted By: Ryan O'Neill @ 3:48:44 PMTop
Show All » 2008 » November
Friday, January 30, 2009FAQ about the First-Time Home Buyer Tax Credit
Frequently Asked Questions
About the First-Time Home Buyer Tax Credit
The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after April 9, 2008 and before July 1, 2009. The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
- Who is eligible to claim the $7,500 tax credit?
First time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs. - What is the 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 homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer. - How do I claim the tax credit? Do I need to complete a form or application?
Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. No other applications or forms are required. No pre-approval is necessary; however, prospective home buyers will want to be sure they qualify for the credit under the income limits and first-time home buyer tests. - What types of homes will qualify for the tax credit?
Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. - Instead of buying a new home from a home builder, I have hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after April 9, 2008 and before July 1, 2009.
In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date. - That is "modified adjusted gross income"?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.
- If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $7,500 are available for some taxpayers whose MAGI exceeds the phaseout limits. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income of more than $95,000 and for married taxpayers filing joint returns with an AGI of more than $170,000.
- Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.
Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625. Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances. - Does the credit amount differ based on tax filing status?
No. The credit is in general equal to $7,500 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer. However, if a household files their taxes as "married filing separately" (in effect, filing two returns), then the credit of $7,500 is claimed as a $3,750 credit on each of the two returns. - Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?
In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $7,500. For most first-time home buyers, this means the credit will equal $7,500. For home buyers purchasing a home priced less than $75,000, the credit will equal 10% of the purchase price. - heard that the tax credit is refundable. What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owed). - What is the difference between a tax credit and a tax deduction?
A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $7,500 in income taxes. If the taxpayer receives a $7,500 deduction, the taxpayer’s tax liability would be reduced by $1,125 (15 percent of $7,500), or lowered from $7,500 to $6,375. - Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
No. The tax credit cannot be combined with the MRB home buyer program. - I live in the District of Columbia. Can I claim both the DC first-time home buyer credit and this new credit?
No. You can claim only one. - I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519. - Does the credit have to be paid back to the government? If so, what are the payback provisions?
Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven. - Why must the money be repaid?
Congress’s intent was to provide as large a financial resource as possible for home buyers in the year that they purchase a home. In addition to helping first-time home buyers, this will maximize the stimulus for the housing market and the economy, will help stabilize home prices, and will increase home sales. The repayment requirement reduces the effect on the Federal Treasury and assumes that home buyers will benefit from stabilized and, eventually, increasing future housing prices. - Because the money must be repaid, isn’t the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?
Yes. Because the tax credit must be repaid, it operates like a zero-interest loan. Assuming an interest rate of 7%, that means the home owner saves up to $4,200 in interest payments over the 15-year repayment period. Compared to $7,500 financed through a 30-year mortgage with a 7% interest rate, the home buyer tax credit saves home buyers over $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed. - If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount. - For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount. - Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2008 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the future home buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment. Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
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Show All » 2008 » November
Sunday, January 25, 2009Have you sent your CRPs?
Do you own rental property? As you prepare for tax time keep in mind
that Minnesota law requires landlords to send a Certificate of Rent Paid
(CRP) to any tenant that paid rent during 2008. You may send a single
CRP to a married couple, but unmarried adults on a lease must all
receive their own CRP. CRPs must be sent to tenants no later than
January 31, 2009.
Sending CRPs is one of the many benefits provided for customers of REI
Property Management, as we send this form on behalf of the property
owner. We're busy this week sending out over 500 forms!
If you have questions about CRPs or other issues with rental property,
feel free to contact us at 952-469-5880, or send email to
info@homerentalmanagement.com.
Steve Rajavuori
Broker/Owner
Real Estate InveStore, LLC / REI Property Management, LLC
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