Guide to the Extended and Expanded Tax Credit

Tax Credit Guide
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shortly. To download the slides, please visit
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Tonight’s Speaker

Chris Williamson
Mortgage Advisor - Mortgage California
Phone: (650) 520-0915
www. SanMateoMortgageBlog.com

Chris Williamson Chris@ChrisEWilliamson.com Phone: (650) 520-0915

Questions During the Webinar
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throughout the presentation
• This is an interactive learning environment. You will
get the most value from this program by having your
specific questions answered.
• We welcome all of your questions


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Guide to the Extended and
Expanded Tax Credit

Chris E. Williamson
Mortgage Advisor
Phone: (650) 520-0915
Email: Chris@ChrisEWilliamson.com
Blog: www.SanMateoMortgageBlog.com


Purpose & Goals of the Webinar
Purpose
• Help You Learn What the New
Credit Means to You as a Home
Buyer

Goals
• Understand How You Can Use
the Tax Credit
• Answer Any Questions You Have
About the Credit


Overview
• What is a Tax Credit?
• Biggest Changes for 2010
• Who is Eligible?
• How Much Do I Get?
• FAQs
• How to Claim Credit
• Realities of the Market


What is a Tax Credit?
• Dollar for dollar reduction in the amount of taxes
you owe the IRS

Example
Amount Owed in Annual Taxes $10,000
- Credit -$8,000
Remainder Owed to IRS $2,000


What Happens if I Owe No Taxes?
• IRS will issue you a check for amount of credit
• You will also receive any other rebate owed to you
by the IRS


Biggest Changes for 2010
• First Time Homebuyer Tax Credit extended to
June 30, 2010
• Income Limits for First Time Home Buyers Raised
• Now Includes Existing Home Owners Who Want to
Buy a New Primary Residence


Who is Eligible?
First Time Home Buyers
• Single tax payers
• Married couples filing jointly or separately


Who is Considered a First Time Buyer?
• Have never owned a home
• Have not owned a primary residence in past 3 years
• Currently own a 2nd home or investment property
but haven’t owned a primary residence in 3 years

Who is Eligible?
Existing Home Owners
• Single tax payers
• Married couples filing jointly or separately


Who is a Qualified Purchaser?

Existing home owners are eligible for a credit if…
• Owned & occupied the same primary residence for a
period of 5 consecutive years during the last 8 years
• Purchase a new primary residence


Who Gets What?
First Time Home Buyers
• 10% of the purchase price of the home
• Max available tax credit of $8,000

Existing Home Owners
• Max available tax credit of $6,500


Married Filing Separately
• First time home buyers
▫ Each party can claim up to $4,000
• Existing home owners
▫ Each party can claim up to $3,200


Income Limits for Single Filers
• Eligible for Full Credit with up to $125,000 Annual
Gross Income
▫ Up from 2009 limit of $75,000
• Phases Out if you Make More than $125,000
• Not Eligible if you Make $145,000 or More


Income Limits for Married & Joint
• Eligible for Full Credit with up to $225,000
Combined Annual Gross Income
▫ Up from 2009 limit of $150,000
• Phase Out with more than $225,000 of Combined
Annual Gross Income
• Not Eligible if you Make $245,000 or More


New Deadlines
• New Extension went into effect November 7, 2009
• All contracts must be ratified on or before
April 30, 2010
• All transactions must be closed on or before
June 30, 2010


Military Extension
• Special extension for extended duty armed forces
▫ Military, Foreign Services, Intelligence
• Out of Country for at least 90 days between Dec. 31,
2008 and May 1, 2010
• Eligible for a 1 year extension for the tax credit
▫ In contract on or before May 1, 2011
▫ Close on or before June 30, 2011


Maximum Purchase Price
• Old Rules – No limits on purchase price
• New Rules - $800,000 maximum sales price


Credit Have to Be Repaid?
• Credit Does Not have to be Repaid Unless:
▫ Home is no longer your primary residence at
any time during the first 36 months (3 years)


Claim Credit in Advance?
• Not possible to claim tax credit in advance
• IRS has recently begun prosecuting people who have
claimed the credit and then the purchase did not
take place


What About Seller Financing?
If purchasing a property with seller financing where the
seller retains title to the property you can still claim
the credit….if
• You demonstrate ownership of the property


Demonstrate Ownership By
• Right of possession
• Right to obtain legal title upon full payment of
purchase price
• Right to construct improvements
• Obligation to pay property taxes
• Responsibility to insure the property
• Duty to maintain the property


Purchase from a Step Relative?
• Purchasing from “step relatives” does not make you
ineligible for the credit
• Cannot purchase from a direct blood relative


Non-Occupant Co-Borrowers
Home Buyer is Still Eligible if…
• Co-borrower is a parent
• Parent must not live in the home
• Home buyer meets other requirements of credit


Other Restrictions
• According to the IRS, a credit will not be due if:
▫ Buy a home from a close relative
Spouse, parent, grandparent, child or grandchild
▫ Home is not your primary residence
▫ Sell your home within 1 year of purchase
▫ You are a nonresident alien
▫ Owned primary residence at any time during the 3
years prior to the date of new purchase


Other Restrictions
▫ You are, or were, eligible to the claim the District
of Columbia first time home buyer credit for any
taxable year
Doesn’t apply for home purchased in 2009
▫ Financing comes from tax-exempt mortgage
revenue bonds
Doesn’t apply for home purchased in 2009


Claiming the Credit
• Homes Purchased in 2009
▫ Claim on 2009 return (Form 1040) or amended 2008
return with form 5405
(http://www.irs.gov/pub/irs-pdf/f5405.pdf)
• 2010 Home Purchases
▫ Claim on 2010 return or amended 2009 return
• Possible to adjust W-4 witholdings in anticipation of
2010’s credit
• Copy of HUD-1


Claiming the Credit
• 2010 Home Purchases
▫ Claim on 2010 return or amended 2009 return
• Copy of HUD-1
• Possible to adjust W-4 withholdings in anticipation of
2010’s credit
• Speak to a Tax Advisor before doing this!


Realities of the Market
• Heading into one of the best times to buy
▫ November, December, January
▫ Less competition in all price levels
• Interest Rates are at their Lowest Levels in Years
• Short sales can take months to complete
▫ Plan to be in contract as soon as possible
▫ If you don’t close in time (June 30th, 2009) – no credit


Realities of the Market
• Current inventory of homes below $800,000 in
short supply
• Pace of sale of most affordable homes expected to
increase
• Extended, increased loan limits of $729,750
▫ Money is available
• Spring buying season expected to
start earlier than normal


Resources You Can Use at Home


SanMateoMortgageBlog.com


Financing Questions?
http://sanmateomortgageblog.com/mortgage-financing-question/


Upcoming Classes and Webinars


Class Schedule
http://sanmateomortgageblog.com/class-schedule/


Who We Are
• Multi-Platform Lender specializing in home buyers
▫ Offer benefits of a Mortgage Banker, Direct Lender and
Mortgage Broker
▫ Can offer access to many more loan programs than a
traditional lender
▫ Ability to close in less than 30 days


Who We Are
• Welcome the opportunity to be your lender
• Already chosen a lender? We’ll be happy to be your
second option
• Can also recommend Realtors in your area that
share our passion for education and expertise


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Chris Williamson
Phone: (650) 520-0915
Email: Chris@ChrisEWilliamson.com
www.SanMateoMortgageBlog.com

Guide to the Extended and Expanded Tax Credit

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