Nancy Moeller's Blog

There are two seldom discussed points about the new $8,000 tax credit that present potential benefits to qualifying buyers.

1. The taxpayer can choose to take the tax credit on their 2008 or 2009 tax return, depending on which is more advantageous.

2. The taxpayer can amend or extend their 2008 tax return in order to receive the credit sooner!

Here are the details:

Question: If I'm qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?

YES! The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

Question: For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

YES! If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

As always, the most important thing is to consult with your tax advisory before implementing any real estate or tax strategy.

Nancy Moeller, CPA, Real Estate Broker

Seven Gables Real Estate

Direct: 714 276-7006

Here's a great chart that further summaries the major changes and improvements to the First Time Homebuyer Tax Credit. The chart compares the previous credit with the one retroactive to January 1, 2009.

As always, be sure to consult with your CPA and Real Estate Broker before making a decision to purchase, sell or exchange real estate.

Nancy Moeller, CPA, Real Estate Broker

Seven Gables Real Estate

Direct: 714 276-7006

February 13, 2009 Update: While it started out with more promise, a higher credit and broader reach, at least there is something in the stimulus bill that will boost buyer demand and help the housing market.

Here are the details of the current proposal without the fluff. Remember, it's not "official" yet so some of these details may change in the week to come.

1. The credit is a maximum of $4,000 for single taxpayers or $8000 (for couples)
2. The actual credit is for 10% of the purchase price of the property (up to $8,000)
3. Only first time homebuyers are eligible. "First Time" is defined as a person or couple who had no ownership interest in a principal residence in the United States during the three years ended on the purchase date of the residence for which the credit is claimed.
4. The property must be your "primarily residence" - no investment properties.
5. The credit phases out for taxpayers with Adjusted Modified Gross Income more than $75,000 and is elminated completed at $95,000 ($150,000 to $170,000 for couples)
6. The property must be bought between January 1, 2009 and December 31, 2009.
7. The credit is "refundable" if your taxes do not equal $8,000.
8. You must keep the property at least 3 years or the credit must be repaid.
9. Unlike it's $7,500 predecesor last year, this is a real tax credit. The $8,000 tax credit does not have to be repaid.
10. Question:  What if I bought a house last year and qualified for the $7,500 tax credit? Do I have to repay it? Answer: Only if the repayment provision in the new home buyer tax credit is made retroactive (i.e. is back dated to April 9th 2008). This detail is still to be finalized.

Please continue to check back as I will continue to blog current and relevant details.

Nancy Moeller, CPA, Real Estate Broker

Seven Gables Real Estate

Direct: 714 276-7006

Note: This proposal was subsequently modified. See blogs on $8,000 Tax Credit that follow.

Even before I saw it on CNN, it's my father who called with the exciting news ... finally a stimulus amendment that could actually stimulate the housing market!

The senate said yes to one of the best proposals we've seen to date that can actually make an immediate difference in our housing market. Now, let's see how the house and new President respond.

The $15,000 Tax Credit Prososal

The credit would be for 10% of the purchase price of a house, up to $15,000. The credit would spread over 2 years - $7,500 the first year and $7,500 the second year. Unlike the $7,500 first time home buyer "credit" (which is actually not a credit, but an interest free loan), this real credit would not have to be paid back.

As proposed, the credit would apply to any house purchase - including investors and those crazy flippers out there. (My personal prediction is that this will be rewritten to exclude investors, but we'll see.)

As everyone and their brother tries to get a piece of the $900 billion package (where are we getting all this money anyway?), finally a bargain deal at only $19 billion that can make a difference.

Stay tuned ...

Nancy Moeller, CPA, Broker Associate

Seven Gables Real Estate

Direct: 714 276+7006

Let's say that a seller has had their home listed for $440,000 and although the comps support their price, the property has been sitting on the market for 120 days with no offers. Sound familiar?

As we all know, there is a huge pool of buyers who have capped their search at $400,000 that view this property as "out of reach". Instead of looking at this "standard sale", they are all looking at foreclosure properties hoping that can outrun the other buyers to the next foreclosure in their price range.

Here's the strategy. The seller of the $440,000 property, instead of reducing his price, offers to pay 3% of the purchase price to pay down the buyer's rate by 1%. (The cost will vary, but just focus on the strategy)

It's almost hard to imagine without seeing the math, but this house is now within the budget range of all of those $400,000 buyers. Plus, if this is the only seller actively advertising this incentive, his property now becomes the "gem" that all the buyers are competing for.

It's time to get out of the box and start thinking about budget, not price.

Buyer's Strategy: Not many sellers have considered this option. It's time to meet with your Realtor and loan professionals to put together a tight package to present to sellers and their agents that can get you into your dream home within your budget.

Selling a home in today's market requires more than a sign in the yard and MLS entry.

Buyer a home in today's market takes more than a tank of gas and master key.

Nancy Moeller, CPA, Broker Associate

Seven Gables Real Estate

Direct Anytime: 714 276-7006