Tax Benefits of Homeownership

The tax deductions you’re eligible to take for mortgage interest and property taxes greatly increase the financial benefits of homeownership. Here’s how it works.

Assume:

$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years, at 7 percent, using year-five interest)
$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)
______

$12,577 = Total deduction

Then, multiply your total deduction by your tax rate.

For example, at a 28 percent tax rate: 12,577 x 0.28 = $3,521.56

$3,521.56 = Amount you have lowered your federal income tax (at 28 percent tax rate)

Note: Mortgage interest may not be deductible on loans over $1.1 million. In addition, deductions are decreased when total income reaches a certain level.

Info from: REALTOR.org

Elimination of Homestead Exemption in Georgia

Public reports of the removal of the Georgia Homestead Exemption have left homeowners confused and agents unsure of what to say in their annual home buyer letters.

The standard homestead exemption (and other exemptions based upon age) still exist and have not changed.

What has been eliminated is the money that the homeowner may have also received under the Homeowner’s Tax Relief Grant.  The measure was passed by the Georgia legislature but was not funded by the state for 2009 due to budget constraints.  It will only be funded if state revenue grows 3% plus the rate of inflation.

 The result will be an average increase in property taxes of $300.00.

We strive to provide you with the best information possible.  If you have any questions on this or any other real estate related topic, please contact us.  We are here to help.

* Information received from:

Morris Hardwick Schneider

Nikki Gilbert Fernandez

Marketing Manager
678-357-2574

Tax Credit Extended Info

Changes to Homebuyer Tax Credit

Frequently Asked Questions Homebuyer Tax Credit Changes 

A message from the Atlanta Board of REALTORS:

Last week, REALTORS® scored a major public policy victory when the U.S. Congress voted to extend and expand the homebuyer tax credit in order to continue stimulating the housing sector of the economy.

The Senate voted 98-0 and the House voted 403-12 on legislation that includes the extension and expansion of the credit. President Obama signed the legislation into law on Friday.

Thank you for making this victory happen. 30% of Georgia REALTORS® responded to NAR’s Call for Action. This grassroots action made a big difference in getting this legislation passed. This is a great victory for the economy, for homebuyers, and for all of us in real estate. Your commitment and involvement on this issue is greatly appreciated

Tax Credit Extension Seems Likely

It seems likely that the U.S. Senate will approve a deal to extend the First-Time Homebuyer Tax Credit, but the devil is in the details.

Florida Democrat Sen. Bill Nelson told reporters traveling to Florida with President Obama on Monday that he thought that the extension would be approved, but both senators and representatives are among those who think that there should be some fiscal offset for the cost of the extension. Spending any more money on the stimulus effort also could stir up a hornets’ nest in some circles.

The proposal in the Senate that appears to have the most likelihood of passage would extend the $8,000 credit through March 31, then its value would drop by $2,000 for each of the subsequent three quarters of 2010. This plan was offered by Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus, a Montana Democrat.

 Source: Associated Press, Andrew Taylor (10/26/2009) and The Wall Street Journal, John D. McKinnon (10/27/2009)

Details of the $ 8,000 Purchase Incentive

This is current information comparing the previous Tax Credit and the Current First Time Home Buyer Tax Credit in place now due to the Stimulus Package signed today by the President. 
 
Stimulus Plan First-Time Homebuyer Tax Credit:
The Stimulus Plan was signed into law by President Obama. It contains a new tax credit for first-time homebuyers. Essentially, first-time homebuyers within certain income limits who purchase a home in 2009 before December 1, 2009 will receive a tax credit of up to $8,000. The program is similar to the $7,500 tax credit which applied to home purchases made in 2008 after April 9. A comparison of the two credit programs is outlined below.

While the Stimulus Plan was still being debated, the Senate version originally included a $15,000 tax credit for all homebuyers. To lower the cost of the Stimulus Plan, the final version of the Plan contained this smaller tax credit, and this tax credit is applicable only to first-time homebuyers

To qualify as a first-time home buyer as defined in the programs, the purchaser (and the purchaser’s spouse) may not have owned a home in the three years prior to the purchase date of the home. Single family homes qualify for the program. The home must be the primary residence.
 
Both tax credits are subject to the same adjusted gross income limitations (full credit for AGI less than $75,000 single/$150,000 joint, phased out for AGI up to $95,000 single/ $170,000 joint).
 
The amount for either credit is the lesser of 10% of the home purchase price or $7,500 or $8,000, as applicable.
While a purchaser still owns the home, the $7,500 credit must be repaid in equal payments over a period of 15 years, starting with the 2010 tax filing. The $8,000 credit will not need to be repaid. Again, the $7,500 credit needs to be repaid, while the $8,000 credit does not!
 
Upon sale of the home, any portion of the $7,500 credit not yet repaid is due in full.  No portion of the $8,000 credit is due upon sale of the home, if the home is owned for more than three years.  If the home is sold within the first three years, the full amount of the credit is due upon sale.
 
The $7,500 credit was not available to any purchaser utilizing state/local revenue bond money to help finance the home purchase.
There is no such restriction on the $8,000 credit.
 
Under both the $7,500 and the $8,000 programs, the credit will be claimed on the purchaser’s income taxes. Any amount in excess of taxes owed will be refunded to the purchaser.
 
Additional information about the tax credit can be found on the websites of the National Association of Realtors (www.realtor.org) and the National Association of Home Builders
http://www.nahb.org .  You also may want to check out the website recovery.gov

*The above information was received from:

Jay Mitchell, Mortgage Planner FIMC . Phone: 678-413-3222/ Fax:770-929-3461. Be sure to view his website:

Jay@LoansByJay.com
www.LoansByJay.com

Home Buyer Tax Credit: How It Works

First-time homebuyers in 2008 can take an income-tax credit on their purchase, thanks to passage in Congress earlier this year of the first-time home buyer tax credit.

The definition of first-time homebuyer is generous. To get the credit, the homebuyer cannot have owned a home in the previous three years. The home must be a principal residence and purchased between April 9, 2008 and July 1, 2009.

The credit is equal to 10 percent of the purchase price, up to $7,500. Single taxpayers with modified adjusted gross income up to $75,000 and couples with MAGI up to $150,000 will qualify for full credit. Singles with MAGI up to $95,000 and couples with MAGI up to $170,000 will get a reduced amount. Those with higher incomes don’t qualify.

If the amount of tax a homebuyer owes is less than the amount of the credit, they get to keep the difference in the form of an IRS refund.

The homebuyer must begin to repay the credit in two years in increments of about $500 a year over a 15-year period for those who received the full credit

Homebuyers who sell their home before the credit is repaid must pay off the loan with any profits. If they sell the home at a loss, the loan is forgiven.

[Editor’s Note: The credit is set to expire in mid-2009, although industry groups, including the NATIONAL ASSOCIATION OF REALTORS®, are encouraging Congress to extend it. NAR is also encouraging Congress to make the credit available to all buyers and to eliminate the repayment requirement. More detail on how the credit works is available from NAR on REALTOR.org.]

Source: Chicago Tribune, Mary Umberger