IRS offers guidance on new $6,500 tax credit for repeat home buyers

IRS offers guidance on new $6,500 tax credit for repeat home buyers


by Kenneth R. Harney
Saturday, January 23, 2010; E01

If you've been holding back on getting involved with the new $6,500 federal tax credit for repeat home purchases, there's no more excuse for inaction. You now have all the official IRS guidance you'll need to buy a house, qualify for the credit and pocket the $6,500.

That's because the Internal Revenue Service finally published the rules for the repeat-purchase credit, with key details for taxpayers that had been missing since President Obama signed the legislation creating the program Nov. 6.

On Jan. 15, the IRS posted its revised Form 5405 on its Web site, http://irs.gov, six weeks after warning taxpayers not to file claims for the $6,500 credit without using the revised form and new instructions.

The credit -- inelegantly described by the IRS as credit for the "long-time resident of the same main home" -- supplements the popular $8,000 credit for first-time purchasers. Owners of existing homes -- specifically, taxpayers who have occupied the same property as a principal residence for five consecutive years during the previous eight years -- may now be able to claim a tax credit on a purchase of another house they intend to use as a principal residence.

The credit is for up to 10 percent of the price of the replacement home, capped at $6,500. The purchase contract must be dated from Nov. 7, 2009, to April 30, and the closing must occur no later than June 30. Members of the armed forces and federal diplomatic and intelligence personnel stationed overseas get an extra year to claim the credit.

The maximum purchase price on houses eligible for the credit is $800,000. Purchasers are not required to sell their previous home, but they must be able to demonstrate that the replacement house is or will be their principal residence.

The new IRS guidance answers key questions that had arisen from the vague language in the legislation. For example, the IRS describes what documentation home buyers must submit with their $6,500 credit claim. On 2009 and 2010 tax returns, buyers should attach the following:

-- A copy of the signed HUD-1 settlement sheet, including the contract sale price and the date of closing. This is to document that the timing of the transaction meets the program's requirements.

-- Evidence of long-term ownership and occupancy of the previous house to meet the five-consecutive-years requirement. This can be property tax records, homeowner's insurance records or IRS Form 1098 mortgage interest statements for the five-year period.

-- For buyers claiming a credit on a newly constructed home, for which a HUD-1 settlement sheet is not available, the IRS will accept a copy of the certificate of occupancy showing the purchasers' names, the property address and the date.

-- For buyers of mobile homes who are not able to get a settlement statement, the IRS will accept a copy of the executed retail sales contract showing the property's address, purchase price and date of purchase.

Congress mandated all this extra documentation after audits uncovered widespread abuses by applicants for the $8,000 credit. Among these were fictitious home purchases in which taxpayers or tax preparers sought -- or obtained -- credits on properties that never were sold or bought. This time around, the IRS says it will rigorously investigate all claims filed, starting with a review of the documentation submitted.

The new IRS guidance also spells out the revised income limits for home buyers claiming credits: Your modified adjusted gross income must be $125,000 or less if you are single, $225,000 or less if you are married and filing jointly. Above these limits, the allowable credit amount begins to phase down in increments and is eliminated once incomes hit $145,000 for singles and $245,000 for married joint filers.

There are pitfalls as well: An advisory posted by the IRS this month spelled out situations in which recipients of tax credits may have to repay them to the government. These include taxpayers who sell their houses within 36 months after purchase. Recipients must also repay the credit if they convert their principal residence to a rental or business property, or if their lender forecloses on the house.

With all the rules now available, here's the action message to potential tax-credit seekers: Speed up your search for the house you want to buy. Get moving. There are only 14 weeks to sign a contract and just five months to go to closing.

Protect Your Property_Do a HOME INVENTORY CHECKLIST

Protect your property with a HOME INVENTORY  

Another new year has begun and along with the New Year you make promises to yourself to set goals. Well, this year make one of those goals a goal to complete your HOME INVENTORY CHECKLIST.

The Holidays are over, family has all gone home and you've put away Christmas decorations for another year. No better time to start your home inventory then right now.

Contact your home owners insurance agent and ask for a HOME INVENTORY CHECKLIST. 

Happy New Year to all and good luck with your inventory!

Staging Your Home: Personal Photos DISTRACT when you are Selling your Home!

Personal photos of your family are not only very distracting when you are showing your home but do you REALLY want someone you don't know being privy to your personal family photos, to your CHILDREN?

Well, Teresa Meyer-Home Staging gives you some alternate choices:

"...when you are SELLING....as stunning as these pictures and wall displays are, they are DISTRACTING to your Buyers..........."
"So... now the BIG question. What do we do with these beautiful photo displays on the walls?"

"Do we take them all down, patch the wall/re-paint and stare at a blank boring wall?"
"Do we add a piece of artwork instead?"
"What if we have A LOT of walls with photos?"
"Don't despair! There is a "Staging Technique" that works quite well."

"One of the easiest and cheapest ways to "neutralize" those family photos is to replace the photos inside."

"Here's how in 3 Easy Steps:

I tell my clients to go to Google.com and then to "Images". Do a search for "Black and White landscaping/nature/trees/flowers....." whatever you prefer or works in that particular room. And it can be in "color" too if it works better for that space.

Once you find what you're looking for, print it off in the appropriate size.

Put it over the existing photo in the frame and Ta-Dah!....you have a nice, neutral photo."

Information courtesy of: http://activerain.com/blogsview/1432182/a-staging-technique-that-neutralizes-those-personal-photos-no-more-distracted-buyers-

Credit card changes are coming this February

New Credit Card Rules Take Effect February 2010. Read about it at the link below.

http://www.allmandandlee.com/bankruptcy_blog/credit_card_negotiation/coming-to-a-credit-card-near-you-february-2010/

"Recovery Through Retrofit" Is it more bunk from the White House?

Vice President Joe Biden recently announced a new "Recovery Through Retrofit" initiative that includes creation of "energy performance labels" and "national energy performance measures" for existing homes. This program seeks to create a national home energy retrofit market by providing: (1) access to home energy retrofit information; (2) access to home energy retrofit financing methods; and (3) access to a trained home energy retrofit workforce. 

NAR strongly supports providing property owners with the education, incentives and resources they need to voluntarily improve their homes and save energy. However, NAR is very concerned that this proposal intends to use the home buying process as the vehicle to implement the labeling of homes. NAR strongly opposes this concept. If the goal is energy efficient homes and buildings, the most effective approach would be to provide the financial resources and incentives that educate and empower property owners to make needed energy improvements. 

NAR President Charles McMillan wrote the White House and the heads of all Federal departments involved in the labeling initiative, requesting an immediate meeting to share our strong concerns about the stigmatizing effects of these labels on real estate at one of the most critical moments in the nation's economic recovery. NAR has also written a subsequent letter from President Vicki Cox Golder describing our concerns in more detail. NAR staff will continue to engage the responsible federal agencies in this process, as well as alert key congressional offices regarding our concerns in this area. 

Visit NAR's Energy Resources/Energy Efficiency homepage on realtor.org.

Dave Liniger founder of RE/MAX comes to Houston

Dave Liniger spoke today in Houston and I had the extreme pleasure of being there. Never has almost 3 hours been more fascinating or interesting. No potty breaks for me...I didn't want to miss a word. Excellent speaker, truly a visionary. Thank you Dave. I've heard nothing but positive feedback all day long from other agent who had been a part of today. Thank you for your positive push and honesty.  We need more folks like you. Hey, if you were running for President today you would have my vote. 

Your Local Real Estate News, a mortgage calculator and Real Estate articles

Want to know more about what local or national real estate is doing?  Need a mortgage calculator. How about the latest rate.  Read consumer articles and information on 50,000 neighborhoods.  All that and more. Check it out at: 

http://annmariegarganoparks.housingtrendsenewsletter.com

Raising interest rates are the big story..be prepared

Higher Interest Rates for 2010.. are being predicted. Be Prepared for Interest Rates to become the big story.
Thinking about buying or selling? You might want to take into consideration that it is being predicted interest rates are going to go up so act now if you are on the fence about buying a home. You don't want to look back and wish you had taken advantage of such low interest rates as they stand now.

Moving to Houston Texas or thinking of Moving to Houston Texas???

Moving to Houston, thinking of moving to Houston or just want to know a bit more about Houston Texas? Check out this YouTube. Great viewing and gives good insite to the city, what to do, where to go.
http://www.youtube.com/watch?v=7im9ndoTEJg