Skip to main content

The First-Time Homebuyer Tax Credit. Team Thayer #realestate #market #housing #investor #econimic #news #oregon

Pondering how to spend your tax refund? These projects do more than pay for themselves. 
The U.S. tax code is notoriously long and difficult to understand — and the few lines about home-related tax issues within those 73,000 pages of code are no exception. But there’s one tax program that still seems to cause lots of confusion: the first-time homebuyer credit. Even though it ended in 2010, the tax credit still applies for certain first-timers who purchased a home in 2008, 2009, or 2010.
Don’t let confusion or uncertainty cause you to miss out on the benefits. Whether you own Eugene / Springfield, Or, real estate or a home in Denver, CO, read on to find out if your real estate purchase qualifies and what you need to know to take advantage of it.

Myth #1: There’s no difference between a tax credit and a tax deduction

The first item to clear up about the first-time homebuyer tax credit program is that it isn’t a tax deduction; it’s a tax credit. Although both tax deductions and tax credits reduce your tax burden, a credit allows you to save more than a deduction does. How? If you have a tax credit of $1,000, for example, you reduce your tax burden by $1,000. But if you have a tax deduction of $1,000, your tax burden is reduced based on your tax bracket. So if you’re in the 28% tax bracket, for example, a $1,000 deduction would reduce your taxes by only $280.

Myth #2: The first-time homebuyer tax credit program still exists

First-time homebuyers can take advantage of the first-time homebuyer tax credit program only if the home was purchased between April 9, 2008, and April 30, 2010 (with a closing date no later than September 30, 2010). Different versions of the first-time homebuyer tax credit exist depending on when you bought your home, so this program still applies to some people but not to others.

Myth #3: There are no income limits to qualify

Depending on your income when you bought your home, you may not have qualified for the first-time homebuyer tax credit. People who bought homes between April 9, 2008, and November 6, 2009, could not earn more than $75,000 modified adjusted gross income (MAGI) or $150,000 MAGI for married couples. Between November 6, 2009, and April 30, 2010, this cap was raised to $125,000 MAGI and $225,000 MAGI for married couples.

Myth #4: Only first-time homebuyers can qualify

The definition of “first-time homebuyer” as it relates to the first-time homebuyer tax credit is broader than you might think. If you bought a home in 2008, you qualified as a first-time buyer if you didn’t own another primary residence in the three years leading up to your purchase. A special long-term-homeowner rule was added for people who bought a home between November 6, 2009, and early 2010. But the requirements were designed to weed out house flippers: to qualify, you must have owned and lived in a home for at least five out of the eight years preceding the purchase of a new home.

Myth #5: You have to pay back the entire tax credit

Depending on when you bought your home, you may not have to pay back the entire credit amount.
  • 2008: The first-time homebuyer tax credit was part of the Housing and Economic Recovery Act of 2008. First-time homebuyers who bought a home between April 9 and December 31, 2008, could apply for a tax credit of up to $7,500 to be used on their 2008 tax return. But this “credit” was not really a true credit. A more accurate description would be to call it an interest-free loan, because it has to be completely paid back. If the full credit of $7,500 had been applied, for example, it has to be paid back over 15 years, at $500 a year, beginning in the 2010 income tax year.
  • 2009: Big changes to the first-time homebuyer tax credit were made in 2009 under the American Recovery and Reinvestment Act of 2009. First-time homebuyers who bought a home between January 1, 2009, and December 1, 2009, could apply for a credit of $8,000, which they could apply to their 2008 or 2009 tax return. Under the new policy, the credit did not have to be paid back as long as the homeowner kept and lived in the home for three years.
  • 2010: A couple of new additions were made to the first-time homebuyer tax credit program under the Worker, Homeownership, and Business Assistance Act, which was signed at the end of 2009. Anyone who planned to buy a new principal residence, not just first-time homebuyers, could qualify for a credit up to $6,500. This credit could be applied to the 2009 or 2010 tax bill and, again, did not have to be paid back as long as the homeowner kept and lived in the home for three years. And in 2010, the income limits were raised.

Myth #6: You have to pay back the credit if you sell

If you took the credit back in 2008 and decide to either sell the home or stop using it as your primary residence before 15 years’ time (beginning with the 2010 tax year), the entire balance of the credit becomes due — with the following exceptions:
  • You sell but make no profit (applies to unrelated buyers only).
  • You die. (Your estate isn’t responsible.)
  • Your home is destroyed or condemned.
  • You transfer your home to your ex as part of a divorce settlement.
If you took the credit in 2009 or 2010 and sold the home or stopped using it as your primary residence before the three years ended, you were required to pay back the credit.

Myth #7: There aren’t any additional tax breaks for first-time buyers

Even though the first-time homebuyer tax credit is no longer in use, there are several tax breaks that many homebuyers in 2015 and 2016 — including first-time buyers — could qualify for.
  • Mortgage interest deduction: You get to deduct the interest you pay on your mortgage from your taxes. And this will be your biggest tax break, says Ray Rodriguez, regional sales manager at TD Bank. “This applies only to your primary residence, but it extends beyond your first mortgage to include any interest paid on home equity lines of credit.” Because you pay most of the interest in the first years due to amortization, you stand to save the most on a newly purchased home.
  • Points: Points paid (one point is equal to 1% of the loan) to lower your interest rate may qualify for a tax deduction.
  • Real estate taxes: You can deduct real estate taxes, also called property taxes, that you pay on your primary and secondary residences.
  • Energy efficient tax credits: You may qualify for a couple of tax credits from making energy-efficient improvements. This includes adding insulation and energy-efficient windows and doors, costs for high-efficiency heating and air-conditioning systems, and water heaters and stoves that burn biomass fuel, says Laurie Samay, certified financial planner with Palisades Hudson Financial Group. Solar water heaters, solar electric equipment, and wind turbines “can enable [homeowners] to reduce their taxes by 30% of the cost of the qualified alternative energy equipment,” she adds.
  • Individual retirement account withdrawals: Until you’re 59½, you can’t touch your retirement account without being hit with a 10% early withdrawal penalty … unless you’re a first-time homebuyer. “You can withdraw $10,000 ($20,000 for couples) from an IRA, without incurring the early withdrawal penalty, to buy, build, or rebuild a first home,” says Emily Brandon, author of Pensionless: The 10-Step Solution for a Stress-Free Retirement(Keep in mind: The experts say pulling from your retirement savings for a down payment probably isn’t the best idea.)

  • Team Thayer  www.teamthayer.com
    JUSTIN LEE THAYER

Popular posts from this blog

The top 5 mistakes people make selling their homes. Team Thayer Official Oregon Real Estate News.

5 home selling mistakes with Team Thayer 1. Trying to sell your home yourself In this DIY era, the urge to try to sell your home yourself to save money can beckon like the smell of oven-fresh cookies at an open house. Resist.  Working with a licensed agent  helps ensure you’re not leaving money on the table as a result of an off-target listing price or a mistake in the many steps that lead to a final sale. Sell your sofa yourself online. List your home with a professional. 2. Picking the wrong Realtor Not all agents are equal. Just because your college buddy dabbles in the industry doesn't mean he’s the best guy to sell your home. You want experience. You want to  work with an agent  who has a depth of knowledge. Invite your buddy to the house-warming party.  Find an agent  who can truly perform. Do you research.  Top Home Sales Mistakes 3. Pricing your home too high Sometimes it’s good to aim high. But when you’re setting a price for your home, it’s better to b

UFC 227 play-by-play and live results #UFC #MMA #UFC227

LOS ANGELES – MMAjunkie is on scene and reporting live from today’s UFC 227 event, and you can join us for live play-by-play and official results beginning at 6:30 p.m. ET (3:30 p.m. PT). The event takes place at Staples Center in Los Angeles. The main card airs on pay-per-view following preliminary-card bouts on FX and UFC Fight Pass. In the main event, bantamweight champion T.J. Dillashaw (15-3 MMA, 11-3 UFC) rematches former champ and ex-teammate Cody Garbrandt (11-1 MMA, 6-1 UFC) for the title. In the co-feature, flyweight champion Demetrious Johnson (27-2-1 MMA, 15-1-1 UFC) has a rematch with Olympic gold medalist and former title challenger Henry Cejudo (12-2 MMA, 6-2 UFC). Follow along with our round-by-round updates and official results beginning at approximately 6:30 p.m. ET for the UFC Fight Pass prelims, 8 p.m. ET for the prelims on FX, and 10 p.m. ET for the main card on pay-per-view. To discuss the show, be sure to check out our  UFC 227 discussion thread . You can als