Ready To Be Stimulized?

February 15, 2009

capitolIt’s a fine mess when Mr. Language Man has to make up words (“stimulized?”). But it’s a pretty messy bill our elected representatives just passed. I’m sure President O would have just preferred to get $800 bill to spend as he needed, when he needed, on whatever he thinks will work. But, nooooo.

I am sure there will be no shortage of articles and blogs on this subject. Still, since I want you to read my blog, here’s a summary of some of the provisions that might be of interest to you:

hometaxcreditRefundable First-time Home Buyer Credit. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). “Refundable” means that even if you don’t owe any taxes at all, or owe less than the amount of the credit, you will receive the difference in cash after filing.

The new bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000 ($4,000 for a married person filing separately), and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase.

Another important change for our area: reinstatement of the increased conforming loan limits for high cost areas. You may recall that our local conforming loan limits rose from $417,000 to $729,750 last year, giving purchasers of higher end homes an important break on interest rates for loan limits up to that amount. At the end of 2008, the temporary limit expired and it dropped to $625,500. This stimulus bill reinstates that $729,750, which should make it easier to get larger loans which now qualify for Fannie, Freddie and possibly FHA guidelines, which translates to lower rates.

newcarSales Tax Deduction for Vehicle Purchases. The bill provides all taxpayers with a deduction for State and local sales and excise taxes paid on the purchase of new cars, light truck, recreational vehicles, and motorcycles through 2009. This deduction is subject to a phase-out for taxpayers with adjusted gross income in excess of $125,000 ($250,000 in the case of a joint return).

energyauditTax Credits for Energy-Efficient Improvements to Existing Homes. The bill would extend the tax credits for improvements to energy-efficient existing homes through 2010. Under current law, individuals are allowed a tax credit equal to ten percent (10%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the taxable year. This tax credit is capped at $50 for any advanced main air circulating fan, $150 for any qualified natural gas, propane, oil furnace or hot water boiler, and $300 for any item of energy-efficient building property. For 2009 and 2010, the bill would increase the amount of the tax credit to thirty percent (30%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements during the taxable year. The bill would also eliminate the property-by-property dollar caps on this tax credit and provide an aggregate $1,500 cap on all property qualifying for the credit.

diploma

“American Opportunity” Education Tax Credit. The bill would provide financial assistance for individuals seeking a college education. For 2009 and 2010, the bill would provide taxpayers with a new “American Opportunity” tax credit of up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this new tax credit, taxpayers will receive a tax credit based on one hundred percent (100%) of the first $2,000 of tuition and related expenses (including books) paid during the taxable year and twenty-five percent (25%) of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent (40%) of the credit would be refundable. “Refundable” means that even if you don’t owe any taxes at all, or owe less than the amount of the credit, you will receive up to 40% of the credit in cash after filing. This tax credit will be subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).

A fairly decent 19-page PDF summary of the whole bill – THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 – is available from the Senate Finance Committee website.

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Realty
Cell: 703-861-9234 • Fax: 703-896-5055 • Email: KimTheAgent@gmail.com

samson-realty-and-birdIt’s Good To Have A Friend In The Business®

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4 – 4.5% Listings with First-Class Service


New Limits On Home Sale Profit Exclusion

January 14, 2009

If you are one of the fortunate folks who own a second home or rental property, and were planning to take fullest advantage of the capital gains tax exclusion on sale of your primary residence, the Housing Assistance Act of 2008 included a change that could impact your tax on the gains.

monopolypoortaxThe existing law excludes $250,000 of the profit from taxation if you’re single, and $500,000 if you’re married, when you sell a primary residence you’ve lived in for at least two of the last five years. (Your primary residence is the place you live; the address you use on your drivers license; where you’re registered to vote, etc.) If, for example, you bought a property in Ocean City, rented it out for several years, and then moved into it as your primary residence for a couple of years, your free-of-tax profit when you sell it under the existing law would have included any increase in value during the whole time you owned it (up to the limits).

The new law modifies that rule – it limits your exclusion (your free-of-tax profit) to the time the home was your primary residence. You must prorate the total profit between the periods the property was not your primary residence, and the periods that it was.

Only the period after January 1, 2009 is relevant – the period it was not your primary residence before that date won’t be counted in determining the “non-residence” time. For example, if you bought a second home on January 1, 2007, rented or vacationed in it for three years, moved into it on January 1, 2010, then lived in it for 3 years until you sold it, you would have owned the home for 6 years, during which it was a rental or vacation home for 3 years, and your residence for 3 years. However, since only one of the rental years was after January 1, 2009, the numerator in your calculation would be one (the number of non-residence years after January 1, 2009), and your denominator would be 6 (the total number of years you owned the property). In other words, 1/6 of your gain would be taxable; if your total profit was $150,000, then $25,000 of that would be taxable. Under the previous law you would have been able to avoid tax on up to $250,000 ($500,000 if married).

The new law only applies where the period when the property was a rental or vacation home before it became your primary residence. It does not apply if it was your primary residence first, and then became a rental or vacation property. In this case, you could be out of the home for up to three years before you would lose the $250,000/$500,000 exclusion.

If you had been planning to move into your current rental or vacation property, you should consider doing it as soon as possible to minimize your eventual taxes.

I’m not a tax professional – consult yours to verify this and explain it further.

Kim Hannemann, Real Estate Consultant/Realtor®, Samson Realty
Cell: 703-861-9234 • Fax: 703-896-5055 • Email: KimTheAgent@gmail.com
It’s Good To Have A Friend In The Business®

samson-realty-and-bird

If you would like to discuss real estate questions, sell or buy a home in Northern Virginia – including Alexandria, Annandale, Arlington, Burke, Centreville, Chantilly, Clifton, Fairfax, Fairfax Station, Falls Church, Kingstowne, Lorton, McLean, Reston, Springfield, or Vienna – contact Kim today.

4 – 4.5% Listings with First-Class Service


Crisis? Yes, But Not Armageddon

October 9, 2008

Two editorials this week in The Washington Post – Is It 1929 Again? and No Depression – suggest that, while the current financial situation is dangerous, it isn’t the end of the earth. My thoughts exactly – we’ll muddle through.

There is not going to be massive unemployment. There is not going to be a major run on the banks. The US government is not going to let that happen, no matter who is elected next month. Smart investors are going to be buying, not selling – judiciously, to be sure – and if you don’t believe me, ask Warren Buffett.

Solving all the economic issues we face is going to take some work. We are inevitably going to have to deal with the Social Security overhang and health care, and both of these are going to require national government solutions – sorry, neocons and libertarians. The tax structure will have to be overhauled, with less income sheltered or excluded from tax, while at the same time lower- and middle-income taxpayers bear a lesser share.

For homeowners, I think limits are eventually going to be placed on deductions for mortgage interest – but I think most homeowners (or, I should say, mortgage-payers) will still be covered. Despite the mortgage debacle, encouraging home ownership remains in the best interest of the country and the community.