November 1, 2009
The U.S. House of Representatives has voted to extend unemployment benefits for an additional 14 weeks, 20 in some of the hardest hit areas. Under the measure, the $8,000 tax credit for first-time home buyers will be extended and expanded to current homeowners.
Folks across the U.S. who are running out of unemployment benefits and those who need an extra incentive to move into a home could get it very soon.
In a vote of 403 to 12, the House passed a measure to extend the home buyer tax credit. Cara Wilkerson with The Charlotte John Company says, "I have a lot of buyers out there excited about the news."
First-time home buyers have been getting an $8,000 tax credit since January as part of the economic stimulus package, but the program was set to expire in November.
The vote Thursday will extend and expand the tax credit to include many buyers who already own homes. She continues, "They've added a $6,500 incentive to sellers who have been in their homes for at least five years. When they sell and buy new homes, they can take advantage of that."
First-time buyers and those who haven't owned a home in the last three years will still get the $8,000 tax credit. To qualify, you must close on the house by June 30th.
"Houses are moving pretty quickly," Wilkerson says families of all economic levels can now cash in and the tax credit will continue to help maintain and create jobs as the economy returns.
"The Little Rock real estate market has been pretty stable over the past year, so this tax credit has just been an extra boost to our economy," Wilkerson concludes.
And that stability and extra boost means more open houses to take a look at if you're in the market to buy.
The bill now heads to President Obama who is expected to sign it.
Although people have been examining the pros and cons of extending the home buyer tax credit, legislators' main focus is to help the millions of unemployed Americans looking for work.
The national unemployment rate comes out Friday; that figure is expected to reach close to 10 percent, possibly reaching a 26-year high.
Home Buyer $8000 Credit Due to Expire Soon
The $8,000 tax credit that's helped thousands of Illinoisians move into their first home expires November 30th, but there are several bills on the table to extend the credit through the middle of next year.
More than $1.4-million taxpayers across the United States have benefited from the tax credit so far. Today's THV spoke with professionals on both sides who gave us insight into the pros and cons of extending the tax credit.
The first time home buyer tax credit is set to expire November 30th unless congress passes an extension. Maurice Taylor says, "It's being introducing into legislation and from everything I hear it is very favorable to pass."
Managing Broker, Maurice Taylor with Crye-Leike says the new Bill will extend the credit through May 2010 and it's critical to get the local and national economy where it needs to be, while making home ownership more accessible.
He continues, "I've been in the real estate business for 10-years and the month of October has been the largest volume month I have ever had. It is in direct correlation with the $8,000 tax credit."
State Economic Forecaster Michael Pakko with UALR says, "But you also have to consider the cost as well. Clearly somewhere down the road we have to pay for these subsidies. That means a larger deficit or somewhere down the line higher taxes or less spending in other areas."
Pakko says it's had a positive effect on the market, but at some point the government needs to let the market stand on its own. "Part of the big build up we had in housing and in the real estate markets was attributable to government policy to encourage home ownership," Pakko adds
Taylor says there won't be many incentives without the tax credit and the current ripple effect creates jobs. He says, "Once a house is sold there are a number of things that have to happen, you have appraisers, inspectors, people doing repairs, construction workers, new furniture; all of those things that go along with owning a home."
Pakko adds, "The hope would be once this program has had its impact that the housing market would be on a self sustainable path."
Taylor says there is also a possibility to make all homebuyers eligible, possibly making business quadruple, but Pakko says that would be poorly targeted because it would add to the deficit and give credit to homebuyers who would buy a home anyway.
Currently, the credit phases out for individuals earning more than $75,000 and married couples earning more than $150,000.
November 15th, 2009
(MoneyWatch.com) This story, by Ilyce Glink, originally appeared on CBS' Moneywatch.com
By now you've heard that President Obama signed the law extending and expanding the first-time home-buyer tax credit, opening it up to many current homeowners and expanding the income limits. Even if you don't plan to buy or sell a home soon, the credit could affect your finances in a big way.
Here's what you need to know to make the home-buyer tax credit pay off for you.
Who Qualifies ...
Under the new rules, there are actually two credits:
First-time home buyers with adjusted gross incomes up to $125,000 (singles) or $225,000 (married) can get the full $8,000 tax credit if they purchase a primary residence before June 30, 2010 and haven't owned a home in the past three years. The credit shrinks if your income is over those levels and is not allowed once income hits $145,000 for singles or $275,000 for married couples.
Current homeowners can snag a credit of up to $6,500 if they've lived in their primary residence for five concurrent years out of the past eight, meet the same income thresholds as first-time buyers, and purchase a primary residence before June 30, 2010.
... And Who Doesn't
In addition to buyers who top out the income limits, there are a few other buyers who are excluded.
Luxury market: You can't use the new tax credit to buy a property that costs $800,000 or more.
Vacation or investment homes: You can't claim the credit to buy a second home, vacation residence, or investment property.
Also worth noting: You can't take the credit if you acquired the home as a gift or inheritance or from your spouse, parents, grandparents, children, or grandchildren.
How Long Do You Have?
The new extension actually pushes the deadline back an additional seven months. Although the credit technically expires on April 30, 2010, if you have a binding contract by that date and close by June 30, you'll still qualify. (The original credit was due to expire November 30, 2009.)
Members of the U.S. armed forces, military intelligence, or foreign service on qualified extended duty get an extra year to take either credit. And if you or your spouse has been deployed overseas for 90 days or more in 2008 or 2009, you have until April 30, 2011 to claim the tax credit.
When Do You Get the Credit?
Glad you asked: Buyers don't actually have to wait to file their 2010 returns to get the credit. As long as you buy a home in 2010 before the program expires, you can claim the tax break on your 2009 federal tax return.
Is There a Catch?
The feds don't want to be seen as helping house flippers, so if you take the credit, you will need to stay put. If you sell the home or move to a different primary residence within three years of closing, you'll then be forced to repay the tax credit.
Advice for Buyers
If you're married and never owned a home, but your spouse owned one within the past three years, the two of you won't qualify for the $8,000 first-time home-buyer credit. You will qualify for the $6,500 credit for current homeowners, assuming you both meet the other requirements.
But if you want to buy a house with your child, the credit's available even if you already own a primary residence. Your child will get the credit of up to $8,000 as long as he or she meets the other qualifications - even if you own half the property.
What If I'm Not in the Market?
Even if you're not shopping for a home, the credit is likely to offer you a payoff.
Sellers: If your house is priced below $800,000, be sure to include language in your selling materials and online, reminding both first-time and trade-up buyers that your home may help them qualify for the credit.
Homeowners: Even if you're not planning to buy another house soon, the credit could help your net worth. The first iteration of the credit certainly seemed to have an impact - the National Association of Realtors says first-time buyers accounted for more than 45 percent of home sales in the past year. If the new tax credit works as well, it could aid the sales of hundreds of thousands of additional homes, sopping up more of the excess inventory. And that's exactly what you want to happen: Your home value can't begin to rise until the other homes in your neighborhood are sold.
Tax credit for home energy efficiency?
By George Saenz Bankrate.com
If you missed out on the earlier tax credits for energy-efficient improvements, they have been reintroduced for 2009 and 2010. The maximum total amount that can be claimed for all products placed in service in 2009 and 2010 for most home improvements is $1,500.
These tax credits are available for a number of products at the highest efficiency levels, which typically cost much more than standard products. Higher credits that run through 2016 are available for some more exotic improvements such as geothermal heat pumps, solar water heaters, solar panels, fuel cells and small wind energy systems.
However, doors, windows, roofing, insulation, water heaters, and heating and air conditioning systems will be the typical products on which you can claim the credit. Not all products will qualify for the credits. For example, an energy-efficient electric water heater does not qualify.
Energy Star provides a table of items that will qualify for the income tax credits. You can claim the credit for improvements to your principal residence in the U.S. Second homes do not qualify except for the more exotic improvements. Use IRS Form 5695 when it's released to claim the credit on your 2009 or 2010 tax return, depending on the date of installation.
Will you have to pay back your tax credit?
By Kay Bell Bankrate.com
Highlights:
- This tax break was the cornerstone of the stimulus package.
- More than 15.4 million taxpayers could unexpectedly owe taxes.
- Technically, you can make your W-4 changes as often as you like.
Did you take a second job this year? What about your spouse; do both of you bring home paychecks? Are you retired, but picking up some part-time work to supplement your Social Security benefits? If so, you might have to pay back some of the Making Work Pay tax credit you received.
This tax break was the cornerstone of the stimulus package that became law in February. Thanks to the Making Work Pay credit, by the time 2009 is over workers will have up to $400 if they're single or up to $800 if they're married and file a joint tax return. Based on revised withholding calculations, the money has been doled out since April as a few extra dollars in each paycheck.
Now, however, some folks might find they'll have to give some or all of that money back when they submit their 1040s next filing season.
But don't panic. The credit won't cost every filer money. And even if you are affected, you still have time to take steps to stave off a larger-than-expected IRS bill.
Credit complications
The possible Making Work Pay credit payback has been a concern since the law took effect. But just how many people it might affect was not known until the Treasury Inspector General for Tax Administration, or TIGTA, issued a formal report on the matter.
That tax watchdog group says more than 15.4 million taxpayers could unexpectedly owe taxes on their 2009 returns because of the credit. Basically, these folks were given more of the credit than they were entitled to receive.
There are some specific taxpayers who are more likely to face this problem:
- Dependents who receive wages.
- Single taxpayers with multiple jobs.
- Joint filers where one or both spouses have more than one job or both spouses work.
- Individuals who file a return using an Individual Taxpayer Identification Number, or ITIN, instead of a Social Security number.
- Taxpayers who receive pension payments or Social Security recipients who receive wages.
In each of these cases, there are limits on the Making Work Pay credit.
Correcting the underpayment
If you're in one of these at-risk groups, you could end up having to pay back the Making Work Pay credit money you got this year unless you act quickly.
"If you're really worried about owing taxes, do a mock tax return," says Cindy Hockenberry, research coordinator with the National Association of Tax Professionals in Appleton, Wis. "All the forms are available at the IRS Web site. Look at what your tax liability is based on your income and withholding so far this year. If you're in a deficit situation, you can easily pay in some additional before the end of the year."
There are two ways to make additional payroll tax contributions. The easiest is to submit a new W-4 and change your allowances so that more will be withheld. To make sure the amount you're having taken out is correct, use the IRS' online withholding calculator.
The problem here, says Hockenberry, is that depending on how many pay periods you have left, it may not be a lot and it might not cover your withholding shortfall.
If that's the case, you also can ask your employer to take -- in addition to the amount based on your exemptions -- a specific dollar amount from your last few paychecks of 2009. You enter that figure on line 6 of the W-4.
Technically, you can make your W-4 changes as often as you like (or until your payroll administrator gets fed up with you!). Some companies, however, might have a cutoff date for changes, particularly at the end of the year, so check soon about your employer's procedures if you want to submit new withholding paperwork.
If you don't have time to make the changes or don't want to give up some cash this coming holiday season, but you know you'll owe Uncle Sam next filing season, you have another option. Hockenberry suggests you can start saving money now to pay your IRS bill when you file.
But on the other end of the payroll tax spectrum, if you usually withhold too much as a way of forced savings and are affected by the Making Work Pay credit, you'll probably still get a refund next filing season. It just will be a bit less than you hoped.
Freelance writer Kay Bell writes Bankrate's tax stories from her Austin, Texas, home. She also writes two tax blogs, Bankrate's Eye on the IRS, and Don't Mess With Taxes, and is the author of the book "The Truth About Paying Fewer Taxes." Bankrate.com's corrections policy Posted: Nov. 20, 2009
