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Archive for the 'Tax Credits' Category
The Question Most Often Asked On Duplex Chick Is…?
March 4th, 2010 categories: Tax Credits
As a Realtor, I get asked a lot of questions.
They range from, “What were they thinking when they installed the bathroom here?” to “Won’t people just make us an offer, even if we list our duplex at a higher price?”
I don’t know the answer to the first question. And the answer to the second is usally no.
But these days, the question I get asked most often is “Does a duplex qualify for the $8000 first time home buyer tax credit?”
And while I’ve discussed it here before, then answer was and is yes.
For the record, multifamily homes like triplexes, four-plexes and apartment buildings qualify too. However, the property must be used as your principal residence. It’s also important to note you can only get credit for the part you live in.
The credit has been structured so that any first time home buyer who has a binding purchase agreement in place by April 30, 2010, can receive up to 10 percent of the property’s purchase price, not to exceed a total of $8000 in the form of a tax credit.
Since only one half of the duplex would be used as your principal residence, you can only use the value of one half of the property to qualify.
For example, if you pay $160,000, your half would be worth $80,000. If you buy a duplex for $100,000, however, your half is worth $50,000. Your tax credit would then be 10 percent of your half , or $5000.
The same would be true if you bought a four-plex for $200,000 and lived in one of the units. The value would again be $50,000, giving you a credit of $5000.
Of course, to receive this credit, you must not have owned a home in the past three years. If you’re single, you can’t earn more than $125,000 a year and if you’re married, the two of you can’t earn more than $225,000.
Purchase agreements must be signed no later than April 30, and the transaction must close no later than 60 days after that.
Call me if you want to beat the deadline.
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Clock Ticking On Minneapolis Duplex Tax Credit
February 15th, 2010 categories: Tax Credits
With all the snow on the ground, April 30 seems ages away.
But really, it’s only 74 days away.
Less than three months to find your first duplex or house before the $8000 first time home buyer tax credit expires. Less than three months for repeat buyers to qualify for the $6500 credit.
Yes, it still sounds like a lot of time. Except for the fact that many of the first time buyers I’ve worked with have taken four to six months to define exactly what it is they’re looking for in a property and then find one that matches both their budgets and criteria.
Remember, purchase agreements must be signed no later than April 30, 2010, to qualify for the credit. New owners must take title no later than June 30.
If you’re wondering whether you qualify, just remember; a first time home buyer is defined as anyone who has not owned a home in the last three years.
A repeat buyer must have lived in their homes consecutively for five of the previous eight years.
For either, income limits are $125,000 for single buyers and $225,000 on a joint tax return.
Of course, in either instance, the maximum home price is $800,000.
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What About The Rodney Dangerfield Tax Credit?
January 11th, 2010 categories: Tax Credits
Did you know there are two home buyer tax credits available right now?
I’m sure you’ve heard of the recently extended $8000 first time home buyer tax credit. But the second?
To quote Rodney Dangerfield, it “gets no respect”.
Maybe it’s because it doesn’t have a catchy, self-explanatory name for the media to latch on to. Instead, it’s often labeled by the rather cumbersome monikers of the “move-up” or “second time home buyer” tax credit.
But neither is exactly accurate. You don’t have to be either moving up or looking for your second home to qualify.
So what is it?
The tax credit, which is can be as much as $6500, is available to anybody who has owned and lived in the same home for at least five of the previous eight years prior to the purchase of their new home. In other words, repeat buyers.
And, like the first time home buyer tax credit, it can be used for any type of property you’re willing to label as your principal residence, including a single family home, duplex, triplex, fourplex, manufactured home or houseboat.
To qualify, single buyers can’t earn more than $125,000. Married buyers are capped at an annual combined income of $225,000. It is phased out past those income limits and dissolves completely for singles who earn more than $145,000 and couples who top $245,000.
While it’s likely that most repeat buyers have homes and duplexes they need to sell to be able to buy another, it isn’t necessary in order to qualify for the credit. The buyer simply needs to declare the new property his or her principal residence.
In recent weeks I’ve actually spoken with several potential sellers who are nearing retirement. They see this credit, when combined with the added incentives of bargain prices and low interest rates as an opportunity to get a better deal on their retirement property. For many, they are simply doing so a little bit early.
Like the first time home buyer tax credit, repeat buyers must have a purchase agreement in place no later than April 30, 2010, and close on the property before the end of June.
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National Real Estate Market Shows Two Faces
December 28th, 2009 categories: Tax Credits, Twin Cities Real Est
While everyone was rushing to the airport or to the mall last week, the real estate market delivered news that appeared to be signs of a split personality.
On Tuesday, there were smiles everywhere when the National Association of Realtors reported sales of existing homes rose 7.4 percent in November from their October mark, and are 44.1 percent higher than they were in November 2008. In fact, current sales haven’t been this high since February, 2007.
On Wednesday, frowns appeared when the Commerce Department reported sales of newly-built homes dropped 11.3 percent; reaching a seven month low.
So what’s the truth about the real estate market?
Here’s a hint. Data for exiting home sales is reported for when the transaction closed. In other words, that leap in November transactions may well reflect the expiration of the original first time home buyer tax credit, which expired at the end of the month.
New home sales, on the other hand, are calculated based on when the contracts were signed; meaning after November 1.
In other words, we may see a similar dip in existing home sales when next month’s data is reported. However, it’s important to note the volume of existing home sales wasn’t the only good news in NAR’s report.
What’s interesting to note is that the total supply of unsold inventory on the national real estate market is down 15.5 percent from one year ago. If no new homes came on the market, we’d be out of houses to sell in 6.5 months.
The last time there were fewer houses to sell was in April, 2006; generally considered the biggest of the boom years.
The basic economic principle of supply and demand dictates that as supply diminishes, prices go up. We’ll see if that holds true as we head toward the April 30th deadline for the first time and “move up” buyer tax credits.
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When Can You Get The First Time Home Buyer Tax Credit?
December 18th, 2009 categories: Tax Credits
If you buy a Minneapolis duplex before the end of the first time home buyer tax credit ends on April 30, 2010, can you get your $8000 check now or do you have to wait until you file your 2010 returns?
After all, the original version of the credit could be claimed against 2008 or 2009 taxes.
The good news is for all qualifying purchases in 2010, first time owner occupant duplex buyers can take the credit on either their 2009 or 2010 tax returns.
However, anyone who purchased a property after November 6, 2009, needs to use a new version of Form 5405, which should be issued by the IRS in the next few weeks.
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Minneapolis Duplex Buyers Should Get More Time To Shop
November 5th, 2009 categories: Tax Credits
If you feel like you missed out on all the good deals before the expiration of the first time home buyer tax credit, there was some good news out of Washington yesterday.
The U.S. Senate voted unanimously to extend the clearance sale.
The $8000 first time home buyer tax credit will now run through April 30. An additional credit of $6500 will also be availabe to buyers who have owned their current home at least five years.
Buyers must have a purchase agreement in place by the end of April, and close on the property within 60 days. Single home buyers must earn less than $125,000 per year to qualify. Couples must earn a joint income of less than $225,000 to be eligible.
The credit would not cover the purchase of second homes, and in order to qualify, the price of the home must be less than $800,000.
Goldman Sachs estimates that approximately 70 percent of all current home owners may qualify for the expanded credit.
The National Association of Realtors estimates that as many as 400,000 recent real estate transactions.
The House of Representatives was expected to vote on the bill as early as today. If it passes, President Obama is expected to sign it.
Upon passage, wise duplex buyers should start shopping well before the April 30 deadline. It will help avoid those last minute tax credit shoppers and the multiple offers they inspire.
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Minneapolis Duplex Tax Credit Extension Just A Bill
October 29th, 2009 categories: Tax Credits
With news out of Washington last night that the Senate decided to extend the $8000 first time home buyer tax credit as well as expand it to include some repeat buyers, my inbox has been swamped with enthusiastic emails announcing the extension.
Wait a minute.
Anyone remember Schoolhouse Rock?
A bill has to pass in both the House and the Senate before it becomes law.
Yes, the Senate agreed to extend the tax credit as we know it until the end of April. They also want to offer a reduced tax credit of up to $6,500 to buyers who’ve owned their current homes for at least five years.
The income levels eligible for qualification have also been increased.
To receive the maximum tax credit, individual duplex buyers can earn no more than $125,000/year. This figure is $50,000 higher than the previous cap. Married duplex buyers can now jointly earn up to $225,000 to earn the maximum benefit. This figure has nearly doubled.
Move up buyers would be faced with the same income caps. Their tax credit, however, would be a maximum of $6500.
As it stands, the Senate’s proposal would extend the tax credit deadline until April 30, with any purchase agreements written by that date needing to close no more than 60 days after in order to qualify.
Of course, both members of the House of Representatives and President Obama need to agree to this for it to take effect.
If you would like to have a chance to earn the credit, it probably wouldn’t hurt to give your Representative a call.
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Another Lap Likely For Minneapolis Duplex Tax Credit
October 19th, 2009 categories: Tax Credits
For those hoping for more time to get around the track in order to take advantage of the $8000 first time home buyer tax credit , it looked like Congress was poised to keep their hands off the stop watch last week.
Both CNBC reporter Diana Olick and Realty Times columnist Kenneth Harney reported last week that sources indicate to them that the credit will be extended for several months past its November 30 deadline.
Chairman of the House Ways and Means committee, Congressman Charles Rangel (N.Y. -Dem.) also stated to Dow Jones Newswires, “There’s no question I think it should be extended. How long, I haven’t discussed.” When it comes to expansion to all home buyers, however, Rangel expressed his opposition.
Both the National Association of Realtors and the National Association of Home Builders have been advocating for a one year extension of the credit, expanding it to all home buyers and capping it at a maximum of $15,000.
Of course, Congress is rightly concerned about how to pay for it. The original tax credit was included as part of the governments stimulus package. To date, this component alone has cost the government an estimated $15 billion.
Having said that, it has repeatedly been credited as being responsible for the uptick in activity in the housing market, and, as a result, one of the most successful pieces of the stimulus package.
Some estimates for the cost of an extension range as high as an additional $15 billion. One solution for covering the additional cost has been offered by the Republican Senator from Georgia, Johnny Isakson, who suggests the extension be funded with some of the unspent money from the original $800 billion economic stimulus bill.
Of course, until legislation is passed, the deadline to qualify for the credit remains November 30. We’ll watch for news out of Washington in coming weeks for further evidence of change.
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Will There Be An Encore For The $8000 First Time Home Buyer Tax Credit?
October 12th, 2009 categories: Tax Credits
With just six weeks left in which to take advantage of the federal $8000 first time home buyer tax credit, overatures are coming from Washington that an encore may be in the works.
Last week the House quickly passed an extension of the credit for military, diplomatic and intelligence personnel serving overseas.
This action may well increase the odds that Congress will extend the program into next year.
Following a meeting with the president at the White House that was attended by Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi, congressional aides said that by en large, Democrats support an extension of the credit. In fact, Reid is the co-sponsor of a Senate bill that would do just that for another six months.
According to Washington Post columnist Kenneth Harney, word of a possible expansion of the credit begin to travel through Washington following the White House session.
Harney’s sources said one of the options under consideration is an expansion of the $8,000 credit to people purchasing replacement homes, provided their incomes do not exceed a pre-determined income limit.
The present tax credit is limited to single taxpayers who earn less than $75,0000 and couples earning $150,000 and less.
While this would be welcome news, we’ll leave our cell phones and lighters in our pockets until the necessary players are gathered on stage, ready to make an announcement.
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Tax Credit Puts Squeeze On Minneapolis Duplex Sales
October 6th, 2009 categories: Tax Credits, Twin Cities Real Est
The federal $8000 first time home buyer tax credit has been a lot like brushing your teeth.
We all know it’s good for us and the economy. And we all know if we don’t rush to take advantage of it, it, like our teeth, may well be gone.
But like brushing, buyers haven’t taken as much advantage of the tax credit as they should until they absolutely had to.
Realtors have been warning them for months of the coming rush, just as dentists warn of decay. And now, the deadline is near.
This fact is clearly reflected in this week’s Weekly Activity Report from the Minneapolis Area Association of Realtors.
The association reports that pending home sales for the week ending September 26 were up 41 percent from the same week last year.
To make matters worse for procrastinators, there are 20 percent fewer homes on the market to choose from than there were one year ago.
Things are even tougher over in the small multi-family market, where there were 40 percent less new listings for the week.
Of those duplexes that came on the market, 84 percent were listed below $200,000. Meanwhile, traditional sellers contributed 29 percent of the new inventory. This is up slightly from the 21.7 percent share of traditional sellers in the market in 2008.
Pended duplex sales were up as well, with 40 percent more receiving purchase agreements in the week than they had in the same strecth one year ago. While the average off market price was down 9.7 percent from last year’s figure, the properties that left the market did so after just 64.6 days. This is 12.4 fewer days than for the week in 2008.
Both years saw banks involved in the negotiations for about 84-85 percent of the transactions.
As we near the end of the tax credit, it looks like we’re all going to be squeezing the tube of toothpaste from every angle.
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