Archive for the 'Legislation' Category

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splashing in puddlesAs the mud settles in the puddle of the first time home buyer tax credit, some of the cloudier issues have begun to clear. 

The other day a reader asked me to point him to actual documentation that an owner occupied duplex qualified for the first time home buyer tax credit.

He also asked whether he was inferring correctly from IRS literature that he could only take half the purchase price of the duplex and use that as the basis for the tax credit.

Well, I’ve polled some accountants and it’s unanimous.

Melanie Schlomann at Abdo, Eick & Meyers LLP says of the type of property, “The important point is it has to be a main home.” She directed me to the definition of “main home” found on IRS Form 5405 which reads:

Main home. Your main home is the one you live in most of the time. It can be a house, houseboat, house trailer, cooperative apartment, condominium, or other type of residence.

“The form instructions for the credit specifically state the credit is available for any first time home buyer purchasing their ‘main home” she adds. “There is no specific clause that states the answer. Many tax laws are open to interpretation and from what I read, a small multi-family residence would qualify”. 

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Yes We Can! Home Buyer Tax Credit May Change Again

said on February 13th, 2009 categorized under: Legislation

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rolling 02I don’t know about you, but I’m starting to get dizzy. 

The Atlanta Journal-Constitution  is reporting that the $15,000 home buyer tax credit, which was replaced with a reduced first time buyer tax credit in the economic stimulus package may not be dead yet.

Our hero, Georgia Senator Johnny Isakson, who sponsored the $15,000 tax credit amendment in the Senate’s version of the package told the Atlanta Journal-Constitution he will continue to push for it in a standalone bill. 

Isakson said, “Quite frankly, there is so much outward support for what we did…that I wouldn’t at all be surprised if you didn’t see it come back in some form with a Democrat’s name on it.”

According to a survey taken by the National Association of Home Builders of 1200 registered voters, two thirds of Americans support the $15,000 tax credit for all home buyers. What’s more, one-third of those polled and 61 percent of renters said they’d be more likely to buy a house if the credit were passed.

A coalition of housing industry companies called Fix Housing First is continuing to urge Congress to consider the credit, believing it would have created thousands of jobs and pumped much-needed money into the economy.

I’m inclined to agree. When the proposal was under consideration, my phone rang like crazy. Potential Minneapolis duplex buyers just aren’t as excited about the amended $8000 first time home buyer tax credit.

Perhaps that’s because there are a lot of people out there who would like to buy or sell; they simply don’t qualify for the credit because they’ve owned a home in the last three years.

Congressional arguments against the credit largely centered on the fact that it would have added $35.5 billion to the cost of the economic stimulus package.

What can we do? Keep writing and calling our Representatives and Senators.  Given enough pressure from constituents, anything’s possible.

Congress Forces Rush to Buy First Minneapolis Duplex

said on February 12th, 2009 categorized under: Buying A Duplex, Legislation

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The Runninging businessman.According to the Los Angeles Times, yesterday’s compromise between the House and Senate versions of the stimulus package now features a $8000 first time home buyer tax credit.

While details have yet to emerge, and this has yet to be signed into law, this credit is significantly lower than the proposed $15,000 credit featured in the Senate’s version of the bill. What’s more, only first time home buyers are eligible for the break.

Unlike last year’s $7500 first time home buyer tax credit however, the $8000 does not have to be repaid. Properties purchased between January 1 and August 31, 2009 are eligible for the break.

As always, owner occupied single family homes, duplexes, triplexes and four-plexes are eligible for the credit.

Fair warning first time duplex buyers:  you have to close on the property by August 31.  It sometimes takes as long as 45 days to get a loan through final underwriting, a period which may be longer still if there is a rush of people trying to qualify for the tax break. 

It would be wise to think of your deadline to have a completed purchase agreement as being no later than July 15, preferably July 1.

You have 4.5 months. The longer you wait, the more competition you’re likely to face from other buyers.

I can think of four duplexes right now that could be a terrific buys. Get in touch with me. I’d be happy to show you where they are.

Minneapolis Duplex Buyers Need to Become Lobbyists

said on February 10th, 2009 categorized under: Legislation

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Capitol Building detailI don’t usually write two blog posts in a day, today’s events in Washington DC compel me to do so.

The Senate just passed the stimulus bill. Now it’s up to negotiating committees from the House and Senate to settle the differences in their versions of the bill. And when it comes to housing, it’s important to note there are some very big differences.

The House stimulus package moves to make the current $7500 first time home buyer tax credit non repayable. In their version, this credit is refundable; even if you didn’t pay that much in taxes, you can get a check from the government.

The Senate’s version doubles that number, makes the tax credit non repayable and available to everybody who buys a home in the next 12months. Of course, with this version it’s a tax credit; meaning you can only get the $15,000 if you’ve paid that much in income taxes over two years. If you’ve paid less in taxes, that’s how much of a credit you’ll get.

It’s important our government representatives know where we stand. To locate contact information for your House representative, click here. Just enter your zip code, and you’ll be given a link with his or her contact information.

Of course, here in Minnesota, we still only have one senator. You can share your thoughts with Amy here.

Congress Done With Magic Lamp For Minneapolis Duplex Market

said on February 6th, 2009 categorized under: Legislation

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Aladdin lampWe kept rubbing, but it looks like we’re not going to get three wishes after all.

The plan submitted to the Senate by Nevada Republican John Ensign that would have encouraged banks to lend at interest rates between 4 and 4.5 percent was defeated yesterday by a resounding margin. I think it would have helped, but most senate Democrats felt it would ultimately prove too expensive to taxpayers.

I called Senator Isakson’s congressional office yesterday in an effort to get a copy of the text of the amendment that provided for the 10 percent or $15,000 home buyer tax credit. They referred me to the Thomas.gov web site, which has to be the most exasperating system for research in the world.

Apparently I wasn’t the only one who called, as the senator now has the amendment posted on his web site.

While yesterday’s information was that the credit could be taken retroactively on purchases made after December 31, 2008, the bill itself says something else. It states eligible properties must be purchased on or after the day the American Recovery and Reinvestment Tax Act of 2009 is enacted and expires exactly one year later.

The credit is non repayable, provided you own the house to two years.

The bill also reads that tax credit may be taken over two taxable years starting with the year the purchase is made, and the year after. Again, however, the amendment goes on to say that the taxpayer may  elect “to treat such purchase as made on December 31, 2008”.

If I’m understanding all of this correctly, think about this. Buy a Minneapolis duplex as soon as the bill is passed. File your 2008 taxes on April 15. Get up to $7500 back from the government in June. Of course, you have to have paid that much in tax in the first place. If you paid less, your tax credit will be reduced accordingly.

No matter. In this market,  that may well be more than the down payment!

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Georgia Senator Johnny Isakson

Georgia Senator Johnny Isakson

Well, somebody in government gets it. So much so that I think Republican Senator Johnny Isakson of Georgia should be made oh, I dunno – the winner on American Idol. I don’t even care if he can sing.  The guy’s a rock star.

See, the senator introduced an amendment to the big economic stimulus package being cobbled together in the Senate. And it was such a great idea that they voted unanimously to approve it. What? Bipartisan support?

It’s easy to understand why. The amendment sunsets the current $7500 first time home buyer tax credit and replaces it with a non repayable tax credit of up to $15,000 or 10 percent of the purchase price of a home, whichever is less.

It gets better.

The tax credit is for anyone who buys a single family home, duplex, triplex or fourplex that they intend to occupy. Not just first time home buyers. Anyone.

There’s even more good news.

Taxpayers can claim the credit on their 2008 tax return. So, if the stimulus package passes and is enacted, you can buy a Minneapolis duplex the week after (which I’d be happy to help you do), file your taxes, and get money back; enough for more than a couple of mortgage payments.

The credit expires at the end of the year.

Of course, once the bill gets passed by the Senate, it has to go back to the House for approval; which means we’re not there yet, by any stretch.

So are southern senators just that much smarter? No. Isakson had the idea because for 20 years he worked as a Realtor.

In the mid 1970s, the United States faced a similar housing crisis when after a construction boom, interest rates rose and there was a three-year supply of vacant homes on the market. 

Isakson recalled that to solve it, Congress passed a $2000 tax credit for anyone buying a new principal sresidence.  Home values quickly stabilized, inventory dropped and the market recovered.

Anyone else suddenly have the urge to buy Johnny Isakson t-shirts and posters?

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home security (blue version)I’m feeling a little giddy this morning.  There’s a reason. See, I read a report on the Realty Times web site about a letter sent to the Senate Finance Committee last week. And it made me want to skip like a little kid.

The story detailed how four trade groups had sent a joint letter to the committee, which is responsible for deciding all tax aspects of the stimulus package before it’s put before the entire Senate for a vote.

In the letter, the National Association of Realtors, National Association of Homebuilders, Mortgage Bankers Association and the Independent Bankers of America expressed their appreciation for the committees decision to follow the lead of the House Ways and Means Committee and make the $7500 first time home buyer tax credit non repayable.

However, the letter also pointed out by the time the bill is signed sometime this month, there will only be four months left in which buyers can use the credit. Therefore, they recommended the committee extend it unti the end of the year.

Here comes the good news. The groups went on to urge the committee to take two additional steps: expand the credit to ALL home buyers and authorize a mechanism where the $7500 credit could be used as downpayment money at closing. How liberating would that be to the real estate market?

In my opinion, those two incentives would do wonders and subsequently, the broader economy. Imagine. The Federal Government will pay you $7500 to buy a house. And you don’t have to wait a year to get the money.

So, what can we do? Well, since President Obama wants us all to help the country out of its tailspin, let’s tell Congress how great we think these ideas are. Believe it or not, when a Senator’s office gets several phone calls supporting an issue, they think it’s a mass movement.

We can make a difference. In Minnesota, this is especially easy. We have one senator to contact; who just happened to be at the White House for the president’s Super Bowl party. Just call or write Senator Amy Klobuchar.  Click on the link, then hit “contact” on her site.  Of course, a communication with the White House might not hurt either.

We can get ourselves out of this mess if Congress just does the right things.

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