Who is Eligible
-First-time homebuyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
-Existing homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit.
-All U.S. citizens who file taxes are eligible to participate in the program.

Income Limits
Homebuyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
-For married couples filing a joint return, the combined income limit is $225,000.
-Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
-The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.

Effective Dates
-The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.

Types of Homes that Qualify
-All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.

Tax Credit is Refundable
-A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
-For example:
-A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time homebuyer tax credit).
-A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
-All qualified homebuyers can take the tax credit on their 2009 or 2010 income tax return.

Payback Provisions
The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.

The www.federalhousingtaxcredit.com site is being updated. Check the site next week for more detailed information on the new tax credit.

Let me know what you think of the information provided in this blog.  Was it helpful?  Are there any other questions you have that weren’t answered here?  Let me know by providing a comment below.

Here are some of the most frequently asked questions on the changes to the Homebuyer Tax Credit provided by the National Association of Realtors (NAR).

Question: Existing homeowner credit: Must the new house cost more than the old house?

Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6,500 credit.

Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6,500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.

Question: I am a first-time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?

Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phaseout range).

Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6,500 tax credit?

 Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.

Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6,500 tax credit if I meet all the other eligibility tests?

Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6,500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight what he did since 3 years doesn’t impact eligibility.

Question: I am an eligible firsttime homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?

Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.

I hope you found this information valuable.  Please feel free to leave a comment below.  And as always, I’d love to hear your ideas for my next blog.

Thanks for taking my blog views to over 40,600!!

Short sales and foreclosures are a major part of most real estate markets across the country and many sellers are hearing incorrect information regarding their tax consequences after their home has sold.

In 2007, the federal government passed a law directing the IRS not to count mortgage debt forgiven by a lender as income…but it applies only to purchase money.  The forgiven debt does NOT include debt on a cash-out refinance or 2nd homes.  There is also a dollar limitation of $1 Million for married couples filing separately and $2 Million for joint filers. 

There is also the case of secondary debt and whether that is forgiven or not.  Once the primary lien holder approves a short sale, it is common for the secondary lien holder to accept a small partial payment.  But, many times the secondary lien holder will sell the balance to a collection agency for a small sum…so a homeowner may think that they will be able to apply for a loan in 2-3 years after a short sale but find out that they have a collection agency contacting them seeking payment of that debt.

Short sales are complicated and they have legal and tax consequences for sellers.  It is extremely important that all homeowners considering a short sale have a discussion with an attorney and accountant so that they know exactly what they will be responsible for financially. 

If you are in the Northern Colorado area and would like to discuss options then I’d be happy to share my experience as a Certified Distressed Property Expert and guide you through the process. 

Thanks for the read!  My readers have taken my blog to over 40,500 views!!

Please provide comments on this article and any suggestions for a future article…your input is always appreciated…thank you!

Today (October 28, 2009), Senate Majority Leader, Harry Reid, reached an agreement with key senators to extend the tax credit.  According to the deal that has been reached, the existing tax credit will be extended to April 30, 2010.  Buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement.  The measure still faces votes in the full Senate and the House before final approval.

First-time home buyers would continue to get an $8,000 credit. 

Also eligible for a tax credit are repeat buyers of primary residences!  Repeat buyers of primary residences would be eligible for a credit of $6,500!  To qualify, current homeowners must have lived in their primary residence for five continuous years.

The credit would be available for individuals making up to $125,000 a year and couples up to $225,000.

There are still some unrelated issues that will delay the announcement for a couple weeks!

Have you been wondering if it was possible to buy your first home or move up to a larger home?

Mike Malvey, RE/MAX Advanced, 970-420-7235

I work exclusively in Fort Collins, Colorado and the immediate surrounding area.

As always your feedback is greatly appreciated…and thank you for taking the blog reads to over 40,000!!!  That is amazing!

During the September through October months in the Rocky Mountain National Park (RMNP), there is a very distinct sound that can be heard loud and clear and it sounds like a bugle you might hear being played by a marching band at a college football game.  But, in fact, that bugle comes from bull elks during their mating season.  The unique rutting call of bulls can be heard from dusk to dawn and some of the better locations within RMNP to hear and see the bull elks are in Horseshoe Park, Moraine Park and Upper Beaver Meadows.

Not only can you view the bull elks in RMNP but you’ll also find them grazing around the town of Estes Park on golf courses and in front yards.  If you are lucky you might come across a couple bull elks battling for the attention of a female elk.  Typically the dominant bull elk has a full set of antlers and a bellowing bugle.  Occasionally the bull elks will enter into a competitive battle ramming each other with their antlers.  I was able to witness bull elks fighting a couple years ago and it was amazing to see in person…which leads me to a very important topic about watching wildlife…etiquette.

Elk gather in the open meadows and are easily visible when left undisturbed. The RMNP has strict rules to follow during the elk rut and they will not allow people to venture into the park’s meadows between 5 p.m. and 7 a.m. and visitors must stay on roadways and designated trails. Look for postings alerting you to areas that have been closed.

Please remember that wildlife are the natives in this area and we are the visitors! Wildlife are very keen on “personal space.” In other words, they’re happier if you keep your distance. Many people will bring binoculars or a telephoto lens to get a close up view of these majestic creatures. If your presence causes the elk to move away, then you are too close. Within the park, you may be cited for harassment of wildlife if your actions affect the behavior of an animal in any way.  As soon as you park, turn off your car lights and engine. Shut car doors quietly and speak softly. Don’t use headlights or flashlights to illuminate or entice wildlife. 

Please be respectful of the wildlife so everyone can have the same enjoyment when they visit the Park.

How would you know if you might qualify for the $8,000 first-time home buyer tax credit?  Take a look at this video to learn some of the ins and outs of the tax credit.

If you would like more information about the first time home buyer tax credit then send an email to: TaxCreditExpert@MikeMalvey.com.

If you would like to attend our next first-time home buyer class then visit: www.FortCollinsBuyerWorkshop.com or email BuyerWorkshop@MikeMalvey.com.

The tax credit expires at the end of day on November 30, 2009 (as of August 5, 2009) so you must purchase your home by then!  Don’t miss out on this opportunity to get paid for buying a home!

The 20th annual Colorado Brewers’ Festival in historic downtown Fort Collins will be on June 27 and 28, 2009.  There will be over 50 Colorado beers to enjoy along with all the live music during the festival hours from 11 a.m. to 6 p.m. each day.

Obviously, everyone that will be sampling the beers must be at least 21 years of age.  The admission is $10 for a 2-day pass and $6 for a Sunday only pass.  The beer tokens are $2 and you need beer tokens in order to get your beer samples!  There will be a designated driver program available for non-beer drinkers.

The Colorado Brewers’ Fest is made up solely of Colorado Breweries, including host breweries from Fort Collins: Anheuser-Busch, Big Horn Brewery/CB & Potts, Coopersmith’s Pub & Brewing, New Belgium Brewing Co., Fort Collins Brewery, and Odell’s Brewing

VOLUNTEERING: 
The Downtown Business Association accepts volunteers to work 4-hour shifts throughout the event. As a Colorado Brewers’ Festival volunteer, you will receive a special edition T-shirt and complimentary entrance into the festival. Please call (970) 484-6500 to volunteer.

Come down and sample some of Colorado’s best brews all in one place.  From past experience, I would suggest having sunscreen and water as it is typically a hot day and not much relief from the sun or dehydration.  Be smart and assign a designated driver BEFORE you even get to the event. 

Have a great time and maybe I’ll see you down there.  Thanks for reading my blog.

Now that I have earned the Certified Distressed Property Expert (CDPE) designation for my comprehensive knowledge of short sales and foreclosures, I feel it is necessary to share how the IRS regards canceled debt.  The information below was copied directly from the IRS website.

Topic 431 – Canceled Debt – Is it Taxable or Not?

In general, if a debt for which you are personally liable is canceled or forgiven, other than as a gift or bequest, you may have to include the canceled amount in gross income. Depending on the circumstances by which your debt was canceled and the nature of any property associated with the debt, the canceled debt may qualify for an exception to resulting in gross income, or the canceled debt may result in gross income but the income may be excluded.

A debt includes any indebtedness for which you are liable or which attaches to property you hold. If property is associated with a debt, a cancellation of all or part of the debt may occur as a result of foreclosure proceedings on the property, repossession of the property, your return of the property to the lender or your abandonment of the property. Regardless of the factors relating to the cancellation, you must report any taxable amount as ordinary income from the cancellation of debt on Form 1040 or Form 1040NR and associated sub-schedules as advised in IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

If a federal government agency or an applicable financial entity cancels or forgives a debt you owe of $600 or more, you should receive a Form 1099-C (PDF), Cancellation of Debt, showing amounts and other information relating to the cancellation. The amount of canceled debt is shown in Box 2 of the form.

Canceled Debts that meet the requirements for any of the following exceptions or exclusions will not be taxable.

Canceled Debt that Qualifies for Exception to Resulting in Gross Income:

1. Amounts specifically excluded from income by law such as gifts or bequests
2. Cancellation of certain qualified student loans
3. Canceled debt that if paid by a cash basis taxpayer is otherwise deductible
4. A qualified purchase price reduction given by a seller

Canceled Debt that Qualifies for Exclusion from Gross Income:

1. Cancellation of qualified principal residence indebtedness
2. Debt canceled in a Title 11 bankruptcy case
3. Debt canceled due to insolvency
4. Cancellation of qualified farm indebtedness
5. Cancellation of qualified real property business indebtedness

The exclusion for “qualified principal residence indebtedness”, enacted by the 2007 Mortgage Relief Act, now provides additional canceled debt tax relief for many American home owners involved in the mortgage foreclosure crisis currently affecting much of the country. The Act allows taxpayers to exclude up to $2,000,000 of “qualified principal residence indebtedness”.

Generally, if you exclude canceled debt from income under one of the exclusions listed above, you must also reduce your tax attributes (certain credits, losses, and basis of assets) by the amount excluded. You must file Form 982 (PDF), Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the exclusion and the corresponding reduction of certain tax attributes.

Refer to Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, for more detailed information regarding; taxability of canceled debt, how to report it, and related exceptions and exclusions. Additional information can also be found in Publication 525, Taxable and Nontaxable Income.

Caution: If you have property that is security for a debt and that property is taken by the lender in full or partial satisfaction of your debt, you will be treated as having sold that property and may have gain or loss as a result. The gain or loss on such a deemed sale of your property is a separate issue from whether any canceled debt also associated with that same property is includable in gross income. See IRS , Sales and Other Dispositions of Assets, for detailed information on reporting gain or loss from repossession, foreclosure or abandonment of property.

I hope you found this information valuable.  As always, you should consult your attorney and/or accountant to see how this would apply to your specific situation.

You can reach me for questions at ShortSaleExpert@MikeMalvey.com.

Thanks for taking my blog views to over 31,000!!  Your comments and feedback are always encouraged and appreciated.

 With all the recent changes to the lending industry, I wanted to provide an update on the latest FHA requirements for their Kiddie Condo Loan.

Kiddie Condo is simply a loan that included a non-occupying co-borrower, usually a parent helping their college age kids qualify for a home.

In prior years, the occupying borrower did not need to be able to qualify on their own, they just needed to have clean credit or no credit.  Here is what has changed for FHA loans:

1. The occupant needs to have credit, 3 tradelines.  With reported credit, they have to have a 620 credit score.   If they do not have a credit score, they have to have 3 alternate sources of credit with consistent, timely payments for at least the most recent 12 months.  Sources can include:  rent, utilities, cable, cell phone or land phone, insurance payments, etc.  Anything that is paid monthly that can be verified with 12 months of canceled checks and verification of payments from the provider.
2. If they do not have a credit score, they need to have a job and partially qualify on their own.  If they have a credit score of at least 620, then they do not.
3. the property can be any property, not just a condo.
4. This is for FHA only, all properties need to meet the 51% owner occupancy requirement
5. 3.5% is the down payment requirement, no down payment assistance is available when using a non-occupant co-borrower
6. 6% is the maximum seller contribution to go toward closing costs, prepaid items, and rate buydown.  NO portion of this can go toward down payment

Conventional options do not exist for this type of borrower. For conventional loans, if the “child” cannot qualify on their own, the parent has to purchase the property as an investment property. Here is what is needed for this:

1. 20% down payment is required
2. 680 minimum fico score, and with this score, rates and fees are very costly
3. ideal credit score is 740 and 25% down for best rates
4. If child is on the loan, they have to meet the same credit score requirements.  The lowest middle score of all borrowers is the qualifying score

Hopefully this information helps provide a more clear picture of the wonderful Kiddie Condo Loan.  It’s truly a remarkable loan especially for parents of CSU students that would like to help their son or daughter begin earning valuable credit and reap the benefits of homeownership.

If you would like more information regarding Kiddie Condos in Fort Collins, be sure to visit www.FortCollinsKiddieCondos.com or email me directly at CSUCondoExpert@MikeMalvey.com and I’ll be happy to answer your questions.

Thanks for taking my blog past 30,000 views!

Governor Ritter signed HB 1091 into law.  The new law will cover all new residential construction and existing single-family and multi-family housing units offered for sale, transfer or rent.  

Beginning July 1, 2009, a seller of residential real property containing a fuel-fired heater or appliance, a fireplace, or an attached garage will be responsible for assuring that a carbon monoxide alarm is properly installed within 15 feet of the entrance to each room lawfully used for sleeping.  No person shall have a claim for relief against a property owner or their authorized agent if a carbon monoxide alarm is installed in accordance with the manufacturer’s published instructions. 

HB-1091 covers all existing single-family and multi-family housing units offered for sale, transfer or rent.  In additon, all new residential construction is required to comply.

A Carbon Monoxide Alarm:

• Detects carbon monoxide and produces a distinct, audible alarm;
• Conforms to standards recognized by independent product-safety testing laboratories;
• Is battery powered, plugs into a home’s electrical outlet and has a battery backup, or is connected to an electrical system via an electrical panel;
• May be combined with a smoke detecting device if the combined device has signals that clearly differentiate between the two hazards.

Carbon Monoxide Alarms must be:

• Intalled in all homes with a fuel-fired heater or appliance, a fireplace, or an attached garage;
• Installed within 15 feet of the entrance to each room lawfully used for sleeping.

What a REALTOR® Needs To Know!

• By July 1, 2009, the Real Estate Commission will require each listing contract for residential real property to disclose the requirements specified by HB-1091.
• No person shall have a claim for relief against a property owner or their authorized agent if a carbon monoxide alarm is installed in accordance with the manufacturer’s published instructions.
• A seller of residential real property is responsible for assuring that an operational carbon monoxide alarm is properly installed.
• A buyer of residential real property shall have no claim for relief against any REALTOR® for damages resulting from the operation, maintenance, or effectiveness of a carbon monoxide alarm if the REALTOR® complies with the law.
• Nothing in the legislation precludes local governments from adopting or enforcing more stringent requirements for the installation and maintenance of carbon monoxide alarms.

I hope you find this information helpful.  Please contact me with any questions, Mike@MikeMalvey.com.

 

 

 

 

 

 

 

 

 

]]>