Government 
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First Time Homebuyer Tax Credit Extension (HR 3842)

Representative Kurt Schrader, Democrat from Oregon, and Representative Steve Driehaus, Democrat from Ohio, have co-sponsored a bill, H.R. 3842, that would amend the Internal Revenue Code of 1986 to extend the first time homebuyer tax credit.

The current first time homebuyer credit is set to expire on December 1st, 2009. Schrader’s bill would do two crucial things:

  • The program would be extended to October 1st, 2010,
  • Homes purchased “after 2008,” rather than “in 2009” would be elivible.

There is also one other change, you could treat the purchase of a home after December 31st, 2009 and before October 1st, 2010 as occurring on December 31st, 2009 for tax purposes. In other words, if you bought the house in 2010, you could take the credit on your 2009 tax return.

Don’t get too excited just yet, the bill was introduced on the 15th and was referred to the Committee on Ways and Means. Several bills just like this one have been introduced over the last few months and died in the Committee on Ways and Means (HR 1993, HR 2606, HR 2655, HR 2905… the list keeps going).


 The Home 
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$8,000 First-Time Homebuyer Credit to be Extended for Military

Yesterday, the House of Representatives voted 416 to 0 to pass the Service Members Home Ownership Tax Act of 2009 which extends the current $8,000 first-time home buyer tax credit for another 12 months for members of the military, Foreign Service, and intelligence corp who served at least three months of qualified overseas duty in 2009. The program is set to expire on November 30th, 2009 for everyone else and the justification for the extension makes sense. If you’ve been serving abroad for our country, it makes it very difficult for you to look for a house and take advantage of the program. Extending it another year certainly makes sense.

At the moment the bill has passed only the House of Representatives, it or a similar bill needs to pass the Senate, then reconciled, then signed by the President before it is law.

“If you are in a conflict zone, you don’t have time to get together with your spouse and family to go house shopping,” says Rep. Ron Kind, a Wisconsin Democrat. Rep. Dave Camp, a Republican from Michigan, expressed similar concerns. “A lot of service members get called overseas at a moment’s notice,” Camp says. “And because of the time limit on the legislation now, they can’t always take advantage of it, not because of anything that they did or didn’t do but because of the unique nature of serving in our armed forces.”

It’s estimated that this will result in an additional 10,000 home sales, likely clustered around military facilities, at no extra cost. It’s revenue neutral because there are other revenue generating provisions included in the bill. The Senate received the bill yesterday and is set to vote on it fairly quickly.

As for the original credit set to expire on November 30th, there are discussions about extending the credit an additional six months.

House Votes to Extend First-Time Home Buyer Tax Credit for Service Members [U.S. News & World Report]


 Insurance 
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Keep & Update Your Home Inventory

Living RoomDo you keep a home inventory? When was the last time you update it? If the answer was “no” or “last year,” it’s time you thought about keeping or updating your home inventory. Without it, you could be spending lots of valuable time trying to remember, and prove, the things in your home if you ever are the victim of a burglary, Mother Nature, or bad luck.

The purpose of a home inventory is to document the personal property in your apartment or home so that, in the event of a loss, you can expedite the recovery process with your insurance company. It also can give you an idea of how much insurance to purchase, where too much can be as bad as too little insurance.

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 Personal Finance 
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Playing House: Prepare By Pretending

Tea Party inside a dollhouseWhen we were looking at houses a few years ago, I was paying about $600 a month in rent. I was splitting a $1189 per month, 2-bedroom apartment with a friend and my half was a little less than half. $600 a month in rent is fantastic in the Baltimore-Washington D.C. area and I was thrilled to be able to save up some cash for a house, despite housing prices soaring back then. So, when I started looking, the prospect of paying a $1500 mortgage was downright scary.

That’s when I learned the technique of “pretending” as a way of preparing yourself for major purchases. I should “pretend” I currently have that mortgage and see how it affects my financial situation.

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 Personal Finance 
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Red-Tag 50% Sale on Homes, Going On Now!

Cash is king.

I was reading a great story on CNN today about a families being able to buy homes at a fraction of the price they sold at a few years ago:

Mary Ann Lepley, her husband, Derrick, and their 2-year-old daughter, Melody, have been in their 3,000 square-foot home here for about three months. They bought it for about $250,000. Just two years ago, amid California’s housing boom, the same house sold for nearly $550,000

I’m glad that they were able to take advantage of the current state of the economy because they deserve it. According to CNN, they were “cautious with their spending and savings in recent years,” as other took out home equity lines of credit and borrowed against their future. Now, with the economy turning, they were able to buy a house at more than 50% off. That’s a wonderful story.

I feel for the other family in the story, the Aceves, who bought their house a few years ago for $620,000. Their neighbors bought their house for $220,000 and a house across the street sold for $267,000. (If you’re wondering about these huge swings, it all depends on how much of a view you have in the case of houses that are on the side of a hill) I’m not saying the Aceves were reckless, far from it (I don’t know their situation), but I think everyone would agree they overpaid.

If you have money because you saved when other spent, it’s now your turn to take advantage of the situation. Your financial prudence has opened up a lot of doors.


 Personal Finance 
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How to Strong Arm Your Way to a Better Deal

The economic malaise has probably had an effect on your life, I know it has had one on mine. However, as bad as you think your personal prospects are, it’s worse for companies that have to make payroll, rent, and debt obligations. At the end of the day, you have to take care of you and your own, which is why I recommend that you periodically shop around and use that information to strong arm your way to a better deal on the services you already buy.

Don’t feel badly about using your most powerful a weapon, the power of choice, to negotiate a better deal. When you pay $60 or $80 or $100 a month for cable television, you’re not getting $60 or $80 or $100 worth of service. You’re getting something the company is selling to someone else for $30 a month. They will charge whatever the market will bear and it’s up to you, the consumer, to push back and tell them that their price is too high. At the end of the day, they would rather you spend $5 a month than quit and spend $0.

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 Your Take 
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Your Take: What Futuristic Home Add-On Is On Your Wishlist?

With all the financial turmoil, let’s turn our Friday Your Take from the current to the fanciful. A recent Marketwatch article talks about crazy home add-ons that people are looking forward to now that the prices on those gadgets is coming down (the article pre-dates the financial turmoil, which has seen the value of our brokerage/retirement accounts come down).

Instead of digging through our closets to find the perfect complement for a new shirt, we may hold it up to our bedroom mirror for a computer to scan. Using radio-frequency identification technology, our electronic fashion stylist will then offer suggestions based on what’s in our closet or how the latest edition of Vogue or Teen Beat pairs up something similar.

Rosie - Jetsons Robot MaidSome of the more mundane items, things I’d actually consider getting, aren’t quite so futuristic (or trendy) are energy saving devices that talk to one another. The article discusses a phone armed with a GPS system could notify your home’s heating or cooling system that you’re getting close, then activating the HVAC system. I think that’d be pretty slick.

Something else that would be slick? Rosie. 🙂

What’s funny is that it’s not that outlandish an idea.

What crazy futuristic home add-on is on your wishlist?


 Government 
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$7500 First Time Homebuyer Tax Credit

Farm House with Rising SunUpdate 2/12: The $15,000 provision has been replaced by an $8,000 first-time home buyer credit, according to the Wall Street Journal. The credit is set to expire November 30th unless it is extended (which is currently being discussed).

Senate Republicans added a provision that would make the credit a $15,000 tax credit for all home-buyers, not just first time home-buyers. It would also be a true credit, not a “credit” you have to pay back over 15 years.

One of the big pieces of the housing rescue bill, passed and signed into law in July, was a $7,500 “tax credit” for first time homebuyers. While experts aren’t sure whether it’s “going to work,” these types of tax credits have been used in the past so they do have some history.

There is one aspect of this bill that is surprising and it has to do with one of the qualification rules. You can own a vacation home or a rental property and still qualify for this tax credit. I don’t know if it’s an oversight because of the strict determination of “primary residence” or if it was an intended rule. I don’t think individuals who own rental property or vacation homes necessarily need assistance on buying a primary residence.

First Time Homebuyer Tax Credit Rules

To qualify, you must satisfy these conditions:

  • The home much be purchased as a primary residence.
  • You must not have owned a primary residence in the last three years. For couples, both individuals must not have owned a primary residence in the last three years. Vacation homes and rental properties don’t affect this (you aren’t DQ’d if you have a vacation home or rental property).
  • Must not be a non-resident alien as defined by the IRS in Publication 519.
  • Individuals must have a modified adjusted gross income of less than $75,000 annually and couples MAGI of less than $150,000 to qualify for the full amount.
  • The phaseout range begins at $75,000 and ends at $95,000 for individuals, $150,000 and $170,000 respectively for couples.
  • The home must be closed between April 9th, 2008 and July 1st, 2009.
  • No mention of a credit score or history requirement, but knowing that will help when it comes to getting a mortgage. I recommend checking out myFICO.com, a service of Fair Isaac, the people who invented the FICO credit score.

How the “tax credit” works:

  • The tax credit is 10% of the home’s sale price with a maximum of $7500.
  • You can claim the credit on taxes filed in 2008 or 2009.
  • It’s a credit and not a deduction (difference between tax credit and tax deduction).
  • “Tax credit” is a misnomer because it’s really a zero percent loan with some qualifications.

Tax Credit Loan Repayment Terms

The tax credit isn’t really a tax credit, it’s really just a tax free loan with some qualifications. You have to start paying back this loan within two years and you make equal payments over 15 years. When you sell your home, any profits will go first into paying off that loan. If you sell at a loss, the difference will be forgiven… meaning you will not owe any money on the loan (though it should be recorded as income as is typical with most loan forgiveness agreements, so you will owe taxes on it).

Should You Do It?

I would, why wouldn’t you take an interest free loan? 🙂

(Photo: orvaratli)


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