How to Use the $8000 Tax Credit to Buy a Home Before You Have the Credit February 27, 2009
Posted by Patti Shawgo in First Time Home Buyers, Interesting Stuff, Mortgage News, down payment assistance.1 comment so far
There is a great FAQ put out by NAHB (the Nation Association of Home Builders) about the First Time Home Buyer Tax credit, you can check out the whole thing at http://www.federalhousingtaxcredit.com/2009/faq.php. Now, before I get into this too much, let me say that I am not a CPA, and you should consult yours before you do anything that effects your taxes.
One of the questions on there is about how take advantage of the tax credit BEFORE you buy, considering that you can’t get the tax credit until after you buy. Here’s the idea: Increase your take home pay by increasing the number of exemptions you claim on your taxes. Then take that take home pay and put it in the bank! Depending on your income you might be able to save up your required 3.5% of the sales price (for FHA) within a couple of months. Plus you are making the commitment to yourself to buy the home.
Here’s the text from the NAHB site:
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 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.
Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.
Tax Credit vs. Tax Deduction February 20, 2009
Posted by Patti Shawgo in Uncategorized.1 comment so far
It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.
Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!
One of the great things about being a home owner is the tax advantages that it offers. Most of a homeowner’s mortgage payment is tax deductible, all of the interest paid, property taxes, and for many people mortgage insurance. This can make the $8000 tax credit that much more impactful. If a homebuyer had no tax deductible housing expenses, now they have plenty, he or she could be seeing a refund from that, and then another $8000 on top of it.
Stimulus Bill Housing Provisions in Addition to Home Buyer Tax Credit February 18, 2009
Posted by Patti Shawgo in First Time Home Buyers, Interesting Stuff, Mortgage News, Real Estate, Rehabbing, down payment assistance.add a comment
So by now, we’ve all heard about the $8,000 tax credit for first time home buyers, but there is more in the hefty stimulus package that effects housing and here are some of the highlights:
Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills. Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 
to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties. I will have more info on this one in particular soon….yep, there are new grant programs coming to help people purchase vacant, foreclosed homes.
Changes to the Home Buyer Tax Credit: It’s Forgivable! February 16, 2009
Posted by Patti Shawgo in First Time Home Buyers, Mortgage News.add a comment
So Congress passed the new stimulus legislation on Friday and part of that was changes to the home buyer tax credit. Initially, the bill had changed the tax credit to $15,000 and made it forgivable. Then late last week part of the concessions that were made were making the bill $8000 (or 10% of the purchase price).
The great news is that now that tax credit is forgivable! Plus, the date has been extended through December 2009. So if you purchase between now and then, when you file your 2009 tax returns, whatever you would normally be getting as a refund, add $8000 to. The best news is that you will never have to pay that money back (unlike the $7500 tax credit that was passed in July 2008).
The bad thing about it is that you can’t get this money until after you buy, but it’s still a pretty sweet deal.
Check out CNBC’s House of Cards look at the Housing Crisis February 16, 2009
Posted by Patti Shawgo in Interesting Stuff, Mortgage News.add a comment
By chance this past weekend I came across a show on CNBC about the housing crisis. Now, a lot of times I cringe when I see these kinds of shows as they seem to try to point blame in once direction or another for the current housing crisis. I thought this show did an excellent job of showing how so many different elements went in to what happened, including the great demand from the stock market for more and more mortgage backed securities which fueled lenders becoming more and more lax on their guidelines.
You can check out a preview of “House of Cards” below or watch the whole thing on CNBC at:
- Monday, February 16, 2009 at 6a/8p/12a ET
- Saturday, March 1, 2009 at 12a ET
- Sunday, March 15, 2009 at 9p ET
