Posts Tagged ‘ Tax Credit ’

Federal Income Tax Deadline Extended To April 18, 2011

March 9, 2011
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Taxes due April 18 2011

April 15 is the traditional due date for federal income taxes. It’s a deadline so ingrained in the American psyche that the April 15 calendar date is often called, simply, “Tax Day”.

In 2011, however, federal taxes aren’t due April 15. They’re due April 18. It’s because of a combination of holiday, calendars, and tax law.

The change centers on Emancipation Day.

Emancipation Day is a public celebration in the District of Columbia. Named a holiday in 2005, Emancipation Day honors President Abraham Lincoln’s April 16, 1862 signing of the Compensation Emancipation Act.  

Emancipation Day is a non-working day in the nation’s capitol but, this year, Emancipation Day falls on a Saturday. The municipality will observe the holiday Friday instead. This means that all of Washington, D.C. will be “closed” Friday, April 15 — the usual tax filing deadline date.

This includes the IRS.

Therefore, to accommodate Emancipation Day, the government is extending this year’s federal tax filing deadline to April 18, 2011. This year marks the second time Emancipation Day has forced the change of federal tax filing deadlines.

Also, as a non-related coincidence, tax filers in Washington State taking extensions to October 15 will also get a few extra days. October 15 is a Saturday so the extended tax deadline rolls over to the following Monday — October 17, 2011.

Military Personnel Can Still Claim The $8,000 Homebuyer Tax Credit

March 7, 2011
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Tax credit extended for military householdsFor certain members of the military, and for certain federal employees, there’s just 2 months remaining to get use the federal home buyer tax credit.

Eligible persons include members of the uniformed services, members of the Foreign Service, and intelligence community employees who served at least 90 days of qualified, extended duty service outside of the United States between January 1, 2009 and April 30, 2010.

Spouses of persons meeting the above criteria are eligible as well.

The federal home buyer tax credit ranges up to $8,000 for first-time home buyers, and up to $6,500 for existing homeowners. Existing homeowners must have lived in their “main home” through 5 of the last 8 years to be eligible.

Claiming the federal tax credit is a two-step process. First, eligible persons must be under contract for a new home on or before April 30, 2011.  The home’s closing must then occur on or before June 30, 2011. 

The IRS does not make date exceptions.

Furthermore, both the buyer(s) and the subject property must meet certain minimum eligibility requirements:

  • The home may not be purchased from a parent, spouse, or child
  • The home may not be purchased from an entity in which the seller is a majority owner
  • The home may not be acquired by gift or inheritance
  • Each buyer must meet tax credit eligibility standards
  • The home sale price may not exceed $800,000
  • Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers

The complete program description is published on the IRS website.

Another important note is that the IRS is giving eligible buyers a tax credit as opposed to a deduction.  This means that a taxpayer qualifying for the full $8,000, and for whom the “normal” 2011 federal tax liability is $8,000, will have zero federal tax liability in 2011.

For additional information regarding your tax credit eligibility, call an accountant. Speaking with a tax professional is often worth the cost.

The Home Buyer Tax Credit Extension Has Not Been Passed Into Law (Yet)

June 18, 2010
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Tax credit was not extended -- yetAs its June 30, 2010 closing deadline approaches, the federal home buyer tax credit is back in the news.

Unfortunately, the headlines are misleading.

Contrary to what you may have read (or heard), the federal home buyer tax credit has not been extended past June 30, 2010. At least not yet. And here’s why there’s confusion.

Look at these headlines from earlier this week:

  • Senate Extends Date On Home-Buying Tax Credit (Philadelphia Inquirer)
  • U.S. Senate Approves Extension Of Home Buyer Tax Credit (NASDAQ)
  • Senate Approves Home Tax Credit Extension (Reuters)

Now, nothing above is factually incorrect, but each neglects a key piece of the country’s law-making process — it takes more than the Senate to pass a law. For a bill to become a law, it must pass the Senate and the House of Representatives and then it must be ratified by the President.

To date, we’ve only cleared just one of those 3 steps.

This means that the federal home buyer tax credit has not been formally extended. As of now, it’s still in discussion.  Ultimately, though, if the extension does pass, it’s expected to extend the closing date deadline for Olympia home buyers beyond the original June 30, 2010 date into September 2010.

Homeowners must still have been in contract as of April 30, 2010 to claim up to $8,000 in federal tax credits.

March Pending Home Sales Point To Stronger Spring Market

May 5, 2010
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Pending Home Sales September 2008 March 2010The Pending Home Sales Index moved higher in March as home sales were spurred by low mortgage rates and an expiring tax credit.

A “pending home” is a property that is under contract to sell, but not yet closed.

March marks the second straight month in which the Pending Home Sales Index improved after a series of weak showings this past winter.

March showed a 5 percent increase over the month, but the Pending Home Sales Index is still off its October 2009′s peak.  October 2009 is a comparable period to March 2010 in that it marked the 1-month deadline before the home buyer tax credit’s initial expiration date. The credit was later extended to April 2010, of course.

That said, March’s surge in sales is being felt on the street.

Home buyers in Tumwater no doubt noticed the change in activity. Around the country, anecdotally, multiple offer situations were more common last month and “right-priced” homes tended to go under contract quickly.

The increase in March’s Pending Home Sales is diminishing the nation’s home supply which, in turn, should cause prices to rise in most markets — including Thurston County.

Today’s buyers should consider making an offer sooner rather than later.  Looking at the data, it appears the best time to have found a “deal” on a home may have been in February.

New Homes Sales Were Strong in March, But Not As Strong As The News Would Have You Believe

April 27, 2010
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New Home Sales Mar 2009-Mar 2010The sales of newly-built homes soared in March. Even more than what was expected. But the news may not be as glowing as what the media is telling us.

Take a look at the headlines from last Friday:

  • Sales of new homes rocketed up 27 percent in March (WaPo)
  • New-home sales rise fastest in 47 years (CNNMoney)
  • Sales of New Homes Climb by Most Since 1963 (Business Week)

None of these statements is false, per se, but each is somewhat misleading.  The biggest reason why March’s New Home Sales was even able to rise 27 percent is because data from the month before it — February — was the worst in New Home Sales history.

In February, new homes sold posted its lowest level in recorded history. 

A better comparison would be against March a year earlier; or October 2009, the month before the home buyer tax credit’s initial expiration date. 

Against both of those time periods, March 2010 fared well.

Home buyers – first-timers and repeats alike — went under contract last month, taking advantage of the soon-to-expire federal home buyer tax credit program.  The credit gives up to $8,000 for first-time buyers and up to $6,500 for repeat ones.

Buyers must be in mutual contract on or before April 30, 2010 to be eligible for the credit, and must closed on or before June 30, 2010.

The New Home Sales data included other strong housing data, too. The current supply of new homes nationwide is at a multi-year low.  Along with stronger home demand, this should push Olympia home prices higher throughout the coming months.

It’s no wonder builders are bullish on the economy.

It’s Time To Re-Approve Your Pre-Approval

April 9, 2010
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Get re-approved for your mortgageAs the federal home buyer tax credit nears its April 30 end-date, there’s a lot of would-be home buyers in Olympia still working to get under contract.

A piece of advice for all of them : If your pre-qualification and/or pre-approval letter is more than 8 weeks old, it would be prudent to have your lender “re-pre-approve” you.  Mortgage guidelines have been in flux and your original lender letter may now be invalid.

For example, over the past half-dozen months, the majority of mortgage lenders have reduced their risk tolerance with respect to:

  • Maximum debt-to-income ratios
  • Minimum allowable credit scores
  • Calculation of “assets in reserve”

For buyers of condominiums and co-ops, even the subject property itself is coming under tougher scrutiny.

Today’s mortgage applicants need to be a complete package. It takes more than just good income and credit to get approved anymore and today’s buyers should revisit their qualifications. What passed underwriting in January may not pass in May.

Being pro-active brings other advantages, too. If a mortgage re-pre-approval does unearth an issue, it’ll be easier for every party to the transaction to address and correct it up-front versus trying to clean up a mess once a home’s already under contract.

Call CU Mortgage Division at (360) 539-4687 about your pre-qualification/pre-approval letter before you bid on a home or visit our website at www.cumortgagedivision to apply online for a pre-approval 24/7.

The Federal Home Buyer Tax Credit Enters Its Home Stretch — 30 Days Left

April 1, 2010
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Federal home buyer tax creditThere’s just 30 days remaining to use the federal home buyer tax credit.

The credit ranges up to $8,000 for first-time homebuyers, and up to $6,500 for existing homeworkers who have lived in their main home for 5 of the last 8 years.

Claiming the federal tax credit is a two-step process. First, you must be under contract for a new home on or before April 30, 2010.  Then, you must close on said home on or before June 30, 2010. 

There are no exceptions on the dates (except for certain members of the military).

Timeline aside, homebuyers and the subject property must also meet minimum requirements in order to be tax credit-eligible:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which the seller is a majority owner
  • You can’t acquire the home by gift or inheritance
  • Each buyer in the purchase must meet eligibility requirements
  • The home sale price may not exceed $800,000
  • Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers

The complete eligibility checklist is published on the IRS website.  Or, if you find IRS-speak too difficult, make a phone call to your accountant.  Asking a tax professional’s advice on a tax-related matter is never a time-waster.

And lastly, don’t forget that if you’re claiming to federal tax credit for home buyers, it’s a tax credit and not a deduction.  This means that a tax filer who qualifies for the full $8,000 and for whom the “normal” federal tax liability is $8,000, will owe no federal taxes in 2010 to the IRS.

If you’re an active buyer in Lacey, or anywhere else in the country , mark your calendar for April 30, 2010. It’s 30 days from now and, as the date gets closer, buyer traffic will increase. The likely result is higher home prices and more difficult negotiations.  The best time to act may be today.

Existing Home Sales Flatten And Point To A Much Better Spring

March 24, 2010
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Existing Home Sales Feb 2008-Feb 2010As expected, Existing Home Sales fell in February, slipping 30,000 units versus January’s numbers. It’s the 4th straight month in which Existing Home Sales were lower, month-over-month.

An “existing” home is one that is previously owned and lived-in (i.e. not new construction).

Existing Home Sales peaked in November 2009, just as the First-Time Home Buyer Tax Credit was set to expire. Immediately thereafter, according to the National Association of Realtors®, monthly sales plunged 17 percent in December, then another 7 percent in January.

Comparatively, February’s dip is a modest 0.6 percent and is more in line with the pre-tax-credit Existing Home Sales trend.  The real estate market is rediscovering its normal. 

But “normal” may not last for long.

When the federal home buyer’s tax program was extended last year, the new rules stated that home buyers must be under contract for their new, respective homes on, or before, April 30, 2010 in order to claim up to $8,000 in federal money.  That deadline is approaching and many markets — Lacey included — are experiencing a surge in buyer traffic as April 30 nears.

The Existing Home Sales data doesn’t reflect this new demand, nor the number of new contracts written. It only accounts for home closings and, in February, closings were down.

For today’s buyers, the market looks favorable. The federal tax credit is in place, mortgage rates stubbornly stick near all-time lows, and home prices are staying in check.

Existing Home Sales should gain through March and April, pressuring home prices higher. And, by the time the press reports the gains, the best deals in the city may already be gone.  Consider acting sooner rather than later.

Single-Family Housing Starts Hold Steady For The 8th Straight Month

March 18, 2010
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Housing Starts Mar 2008-Feb 2010Single-family Housing Starts idled last month, dropping just 3,000 units from the month prior, or 0.2%.

According to the Commerce Department’s report, February marked the 8th straight month in which Housing Starts straddled the half-million marker, dating back to June 2009.

This is a different slant on the Housing Starts story as told by the press.

Most publications are reporting that Housing Starts fell 5.9 percent in February. Technically, this is true.  Housing Starts did fall 5.9 percent last month.  However, the Housing Starts data is comprised of three parts:

  1. Single-Family Housing Starts
  2. 2-4 Unit Housing Starts
  3. “Apartment Building” Housing Starts (i.e. 5 or more units)

The press tends to lump all 3 together but that’s not relevant for everyday homeowners and buyers. 

2-4 unit homes, and apartments and condos are a different housing class as compared to single-family homes and are notoriously volatile, too.  Single-family starts are more steady and better reflect the country’s housing stock.

Single-family housing starts are up 32 percent over the last 12 months. 

Meanwhile, the pace of new buyers has not kept up with the pace of new housing stock. Therefore, because home prices are based on supply-and-demand, the price for a newly-built home was down, on average, 7 percent nationwide in January.

With the federal home buyer tax credit expiring soon, home buyers in Olympia will likely create new demand for homes. And with Housing Starts holding steady near 500,000, that should push prices higher through the spring months.

7 Weeks Remain To Find A Home, Claim Up To $8,000 In Tax Credits

March 9, 2010
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7 weeks remain for the Home Buyer Tax Credit ExpirationIn November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.

To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which the seller is a majority owner
  • You can’t acquire the home by gift or inheritance
  • Each buyer in the purchase must meet eligibility requirements

There’s other criteria, too.

For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.

And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction.  This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.

If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase.  You may find sellers more willing to negotiate today than several weeks from now.

Call CU Mortgage Division at (360) 539-4687 to obtain your FREE mortgage loan pre-approval or visit our website at www.cumortgagedivision.com .