A Bigger and Better Tax Credit for Home Buyers… What does it exactly mean for YOU (Part 2)
This is a follow up to the Part 1 from last week. Click here if you need to check that out. Antoine and Shonda Grier from ASG Investments are going to break it down for us again Below we’ll post excerpts from a longer piece that you can go to their site to read along with their contact info in case you have additional questions.
Part 2…
We have had tons of people emailing us asking if this tax bill is just a renewal of the one enacted by Congress in July 2008 and the answer is a BIG “NO”. There are a few key differences between the two and probably the most important one to you is that this new tax credit does not have to be repaid. The previous one (which is still available to those who may not qualify for this specific one) basically was an interest free loan that you had to pay back. This new credit is truly that… a credit, however the home being purchased must be the principal residence for the taxpayer for a minimum of three years or you will be faced with a recapture of the credited amount, and like all rules there are some exceptions that will apply to that.
Here’s some additional good news; participating in the tax credit is really easy and simple. All you have to do is claim your tax credit on your federal income tax returns for 2009. More specifically home buyers will complete IRS form 5405 to determine their tax credit amounts, and then claim this amount on Line 69 of their 1040 returns, that’s it nothing else to do not even a pre-approval or screening all you have to do is make sure you fit the guidelines that have been laid out under the tax credit (hopefully this is being accomplished with the reading of this article).
Looking back through the thousands of emails we received that prompted us to write this article there were two other very common questions being asked and they were, what types of homes will qualify for the tax credit and what does it mean when they say the tax credit is refundable? The first question has a simple answer and that is ANY home qualifies from a single-family, to an attached home i.e. townhomes and condo’s, new construction (regardless if by a builder or if you hire your own contractors to build a home), manufactured homes (mobile homes) heck they have even included houseboats. As long as it’s your principal residence it qualifies. Principal residence is determined identically to how you may qualify for the $250,000 / $500,000 capital gain tax exclusion.
Something else we wanted to make clear here before we move on; if you decided to have your home built by contractors yourself you still qualify as long as your first occupy the residence on or after January 1, 2009 and before December 1, 2009.
So what about the refund and what does that mean? This simply means that the tax credit can be claimed even if the home buyer has little or no federal income tax liabilities to offset. In other words if there are not enough debts to cancel out the tax credit a surplus from the tax credit may remain, in that case the federal government would then send the home buyer a check for any remaining portion. So for example if a qualified individual expected a tax liability of $6,000 and had tax withholdings of $4,000 then without the tax credit the individual would owe the IRS $2,000 on tax day (April 15th). However if the individual taxes advantage of this tax credit and is qualified for the full $8,000 then on April 15th they would be receiving a check for $6,000 ($8,000 tax credit – $2,000 tax liability).
For those individuals who purchase their home under the mortgage revenue bond (MBR) program you can combine the two together this is another notable change from the July 2008 tax credit where you could not combine it with your MBR. As some of you may know there is also a nice home tax credit for first time homebuyers in the District of Columbia but unfortunately you can only claim one.
To find out find out the difference between a tax credit and a tax deduction plus more info visit the ASG Investment Blog to read the entire article. If you have additional questions feel free to call:
Antoine and Shonda Grier
ASG Investments, LLC
1-888-210-6134
Info@asginvestments.com
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Anna
BMWK Partners
