My Real Estate Blog

Home-buyer tax credit still available

Congress has legislated an extension and enhancement of the Home-Buyer Tax Credit program. It now includes home purchases whose sale documents are signed on or before April 30, 2010, and which close by June 30, 2010

As before, first-time homebuyers (those who have not owned their personal residence at any time during the three years preceding the current home purchase) may receive a tax credit of either 10% of the home’s purchase price or $8,000, whichever is less. Single taxpayers can now earn up to $125,000, at which level the tax credit begins to phase out. (It was $75,000 in the earlier version.) Married couples can now earn up to $225,000 (up from $150,000). And there is a new upper limit of $800,000 for the home’s purchase price.

Perhaps the most striking change in the new legislation is the availability of a tax credit (either 10% of the purchase price or $6,500, whichever is less) for “move-up” homebuyers, defined as those who have owned their principal residence for a consecutive five of the eight years before purchasing a new one now.

Given the number of home sales the earlier program appears to have motivated, this new legislation may motivate many of your homebuyers and prove a boon to the real estate recovery. Please feel free to call me for further information at  (727) 781-9072

BAY NEWS 9 -- Florida's existing home and condo sales rose in November, the 15th straight month that sales have increased on a year-to-year basis.

According to Florida Realtors, existing home sales rose 61 percent, with 14,026 homes sold statewide. That compares with the 8,694 homes that sold in November 2008.

In the Bay area, home sales increased by 37 percent over the past year, while condo sales increased by 80 percent.

Florida's median sales price for existing homes was $139,000. A year ago it was $158,200, for a 12 percent decrease.

The national median sales price for existing single-family homes in October 2009 was $173,100.

For condos, 4,889 units sold statewide compared to 2,320 units in November 2008, for an increase of 111 percent. The statewide existing condo median sales price was $104,400. In November 2008 it was $131,400, for a 21 percent decrease.

WASHINGTON – Nov. 6, 2009 – President Obama signed H.R. 3548 this morning, enacting into law an extension, and adjustment, of the $8,000 tax credit for first-time buyers. Among other things, the extension adds money for certain move-up buyers; creates one deadline for signing a contract and a later deadline for closing; changes income requirements; and limits a purchased home’s cost to $800,000.

“Extending the homebuyer tax credit and expanding it to reach more homebuyers is the right thing to do,” says 2009 Florida Realtors® President Cynthia Shelton. “It is critical to maintaining the positive momentum we’ve been experiencing in the housing market and in the overall economy. Florida Realtors applaud congressional leaders for taking action to extend the homebuyer tax credit into 2010, which will help Florida families realize their dream of homeownership, improve our communities and strengthen our economy.”

Adds John Sebree, Florida Realtors vice president of public policy, “Florida residents enjoy two additional advantages. The Florida Homebuyer Opportunity Program (FHOP), created by the Florida Legislature earlier this year, still has approximately $28 million that first-time homebuyers can access and use toward their downpayment. And move-up buyers now have the ability to ‘port’ their current property tax savings to a new home.”

First-time homebuyers

Most details for first-time homebuyers mirror the rules currently in existence. The maximum tax credit remains $8,000 ($4,000 for married individuals filing separately), and anyone who has not owned a home within three years is considered a “first-time buyer.”

• A purchase must be under contract by April 30, 2010.

• A purchase under contract by April 30 must close no later than June 30, 2010.

• After Dec. 1, 2009, income limits rise to $125,000 for singles and $225,000 for married couples; up from limits effective through Nov. 30 of $75,000 for singles and $150,000 for married couples. The tax credit phases out incrementally at each $20,000 increase in income.

• Effective immediately: The maximum home value purchased cannot exceed $800,000. Prior to the law being signed, first-time homebuyers had no limitation on a home’s cost.

Current homeowner tax credit

An existing homeowner who purchases a home may now claim a tax credit of up to $6,500. To qualify, that owner must have owned and used the same residence as a principal residence for any consecutive five-year period in the previous eight years.

• This new tax credit is effective immediately. Eligible homebuyers do not have to wait until Dec. 1 to close in order to qualify.

• Personal income limits, maximum home value, and contract/closing deadlines are the same as those for first-time homebuyers.

Long-time Florida homeowners who enjoy discounted property taxes resulting from the state’s Save Our Homes amendment qualify for property tax portability, notes Sebree. For more information or to calculate how much tax savings can be transferred to a new home, visit floridarealtors.org at: http://www.floridarealtors.org/LegislativeCenter/TopInitiatives/index.cfm

Florida Homebuyer Opportunity Program

Under FHOP, first-time Florida homebuyers can obtain interest-free bridge loans to access their federal tax credit before they complete a home purchase, enabling them to use that money upfront for downpayment and closing costs. Once buyers submit their returns to the IRS and receive their tax credit money, they repay their loans to the state.

The Florida Realtors-backed program came out of the 2009 session of the Florida Legislature. However, as part of the 2009-2010 budget year, did not become effective immediately. They tax credit extension will allow many first-time buyers to tap into the approximately $28 million in the program's remaining funds.

While funded by the state, the money is distributed through the city and county housing offices that operate the State Housing Initiatives Partnership (SHIP) program. There is no standardized program, and each local agency may operate under different rules for distribution. For more information, buyers should contact their local SHIP office.

To find a local SHIP office, go to: http://apps.floridahousing.org/StandAlone/FHFC_ECM/AppPage_SHIPLGContacts.aspx.

Additional changes

The tax credit extension includes other new rules, such as:

• The new law also impacts dependent purchases of homes, which weren’t addressed under the old rules.

• The new law requires a buyer to attach documentation about the home purchase to his or her income tax return. An audit found that some buyers are claiming the tax credit when they don’t deserve it, and investigators continue to seek out fraud. To minimize tax abuse going forward, buyers won’t receive the credit without submitting proof to the Internal Revenue Service (IRS).

The homebuyer tax credit is collected as part of the normal income tax process. As a credit, it’s calculated separately from an individual’s income tax, and paid regardless of taxes owed or withheld from income. As always, however, only a tax planner can render specific advice to anyone seeking the credit. For more information on the credit, contact a tax planner or visit the IRS website at: http://www.irs.gov.