WOW! Boy is there a lot of buzz out there about the $8000 first time home buyer tax credit! The good thing is that it’s seems to be working, I have had an increase in the number of clients that want to or who already have taken advantage of the cre
dit. Now, with the latest FHA announcement of the possibility of using the tax credit as part of the down payment at closing, there is even more interest in the program. Let’s take a look at a couple of common questions that arise:
QUESTION:
1) Who qualifies as a 1st time home buyer?
2) Can you claim the credit on your 2008 taxes even though you bought the house in 2009?
3) What if you owe IRS more than $8000?
4) How can you use the $8000 as part of your down payment?
ANSWER:
1) If you have never owned a primary residence before OR if you have not owned a primary residence for the last 3 years YOU QUALIFY!
2) If you purchased in 2009 you can claim the credit on your 2009 taxes that you file in 2010 OR you can file an ammended return for 2008 and claim the tax credit - YAHOO!
3) Consult your tax preparer, but remember the $8000 is only a CREDIT towards what you owe, so if the bottom line owed to IRS for your taxes exceeds $8000 you don’t receive any portion as a refund.
4) The POTENTIAL use of the $8000 tax credit towards your down payment has not been authorized yet. The details of just how it will work has not been figured out. It may authorize various states and non-profit organizations to issue “bridge loans” to front the $8000 credit BUT, the details have not been worked out. (IRS has a rule saying that no one besides the specified taxpayer can receive refunds) Also, will lenders actually underwrite a loan with this provision? Are we back to encouraging 100% financing ? (I thought that this was one of the things that got us into this mess in the first place)
I WANT THIS TO WORK as I feel it be one more factor in stimulating a very concerned and scared economy and I really think this is another idea that will help us get over the hump. Yet, this is not a time for campaign reteric - this is a time to figure out what is needed, analyze and plan how it will work and THEN announce it. The public is looking for a program that is logical and ready to use now – not an empty promise disgused as an off-the-cuff idea that gets bogged down in realistic implimentation.
No matter what the final outcome of this, I strongly suggest that my clients seek professional advise when it comes to taxes and how this or any other government program may affect them.
NOW… let’s look at cracking down on unfair credit card company practices. Let’s also look at freeing up capital and lines of credit so that businesses can keep their doors open and keep their employees working – if you aren’t working – you aren’t going to buy ANYTHING let alone a home.
2 responses so far ↓
Peggy // May 19, 2009 at 2:50 am |
If I am closing on July 15, when can I submit my amendment for my 2008 tax return? July 16? Or before then?
Ruth // May 19, 2009 at 11:13 pm |
Peggy:
You might want to consult with your tax preparer but I do know that when you file your ammended return you must indicate the address of the house and the closing date. I have clients that prepared the paperwork ahead of time, but did not file the ammended return until they were sure the recording of the deed had taken place. The last thing you want to do is receive your credit and then not close on the house – OOOPS – now you are having to deal with IRS and explaining to them why you filed a fraudulent return and figuring out how are you going to pay them back. As of this morning, FHA has recinded the ability to use the $8000 tax credit as part of your down payment. Better to pay a little more for the house and have the Seller contribute to your closing costs, then get the $8000 after you close to use for savings, improvements etc.
Hope that helps.