File Amended Tax Return To Get Tax Credit Early

IRS Home Buyer Tax credit filing options – a forgotten player in buying your first home in 2009.

One of the big news items in May of 2009 has been the pseudo announcement by HUD Secretary Shaun Donovan of an upcoming tax credit bridge loan to be offered through FHA approved lenders as well as other approved entities. This bridge loan will allow qualifying first time home buyers to capitalize on their home purchase tax credit authorized by the Obama Housing Recovery and Stimulus Plan of 2009. Learn more about the Tax Credit Bridge Loan.

Even with the option of the tax credit short term bridge loan forthcoming for first time home buyers, some home buyers may find that they want some other options for how to claim their tax credit ahead of time. As it stands, the “normal” way to get the home purchase tax credit is to file for it with the 2009 tax return in 2010. This is a long time to wait. However, the IRS has published several filing options for those home buying tax payers who want to get their tax credit earlier.

The following filing option suggestions can be found on the IRS.gov website:

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

Tax Credit Filing Options

• File An Extension – Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15.  This step would be faster than waiting until next year to claim it on the 2009 tax return.  Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.

• File Now Amend Later – Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later.  Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.

• Amend the 2008 Tax Return – Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the home buyer tax credit on the 2008 return without waiting until next year to claim it on the 2009 return.

• Claim the credit in 2009 rather than 2008 – For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

The best advice we can give is call you tax preparer and ask them your options for qualifying for the tax credit if buying your first home in 2009 and what are your best tax credit filing options. Good luck.

First Time Buyers Used State Tax Credit Loan

You may have heard that if you are a first time home buyer and plan to buy a home in 2009, you may be eligible for the $8000 First Time Home Buyer Tax Credit. While this is a great opportunity to get some extra cash just for buying your first home, you have to wait until you file your taxes in 2010 if you do buy a home in 2009 to get your tax credit money from the IRS.

So, if you still need help with your down payment, you cannot use this tax credit to buy a home now in 2009. You must come up with your down payment in some other way. Several options exist for this as it relates to your home purchase tax credit eligibility.

• First of all, you can apply for a short term tax credit bridge loan or a short term tax credit loan program from your state’s housing authority. Some states have initiated this program. Find out what states have a temporary short term tax credit bridge loan below.
• The second option is to seek out an FHA approved lender who is authorized by FHA to offer a short term bridge loan. This program is brand new from FHA. As of May 2009, the program details are still being rolled out and we will keep you updated as to the progress of this program.

State Housing Agency – State Housing Authority Short Term Tax Credit Loan Programs

In an effort to encourage first time home buyers to move forward with buying their first home and tax advantage of the $8000 housing tax credit program initiated by President Obama’s Economic Stimulus Plan, some states have initiated short term tax credit loan programs. These states have initiated this program:

• California – $10,000 New Home Tax Credit
• Colorado – CHFA JumpStart Tax Credit Program
• Idaho – IHFA Down Payment Assistance Tax Credit Advance 2nd Loan Program
  
• Missouri – MHDC Tax Credit Advance Loan Program
• New Jersey – New Jersey First Time Home Buyer Tax Credit Loan Program – Pre-Fund Stimulus Rebate
• New Mexico – MFA Tax Credit Loan Program
• Ohio – OHFA Homebuyer Tax Credit Advantage Program
• Pennsylvania – PHFA Tax Credit Advance Loan Program

To find out whether your state offers a short term tax credit bridge loan program see: State and Federal Home Purchase Short Term Tax Credit Programs

Happy First Time Buyer Family

If you have not heard by now, first time home buyers are eligible for a $8000 home purchase tax credit from the IRS if they buy a home in 2009 between January 1 and November 30, 2009. The Obama Administration authorized the home purchase tax credit with the American Recovery and Reinvestment Act of 2009.  While this is a great incentive for first time home buyers to buy their first home, the incentive has been heavily criticized.

Biggest Hurdle For First Time Home Buyers – Down Payment

Criticism comes from the fact that the $8000 tax credit is only paid to the first time buyer with their IRS tax filing in 2010 of their 2009 return, yet the home buyer is only eligible for the tax credit if they buy a home in 2009. With this being the case, home buyers still have to come up with their down payment and closing costs to buy in 2009. While the tax credit was designed to help stimulate getting new home buyers to buy homes, it does not help first time buyers overcome the biggest hurdle most have which is coming up with their down payment and closing costs.

HUD and FHA Solution: The Short Term Tax Credit Bridge Loan

To assist first time home buyers overcome the hurdle of coming up with their down payment, the Federal Housing Administration – FHA – is rolling out a short term tax credit bridge loan. The short term bridge loan will lend the first time home buyer who qualifies money against their tax credit with the intention of the home buyer to pay back the bridge loan when they get their tax refund in 2010. Specifics of the plan are due out shortly from HUD and FHA.

Stay tuned for further updates.

Difference Between Tax Credit and Tax Deduction

Do you know the difference between a tax credit and a tax deduction? If so, you may not need to continue reading this article. However, if you do not know about the home purchase tax credit and how it is different from a tax deduction you should continue reading.

Tax Credit – A tax credit is a direct dollar for dollar credit against the taxes you owe the IRS after tax deductions have been made against your income. For example, if you owe $4,500 in taxes on your next tax return to the IRS and you qualify for the full $8,000 home purchase first time home buyer tax credit then you would get $3,500 back from the IRS. Pretty sexy right?

Tax Deduction – A tax deduction is a reduction in your adjusted gross income which reduces the amount of taxes you are responsible for paying to the IRS. For example, let us say that you make $60,000 a year for your salary. Now let’s say that you qualify for a $3,000 tax deduction. This means that instead of being taxed on the full $60,000 gross income from your salary you would only be taxed on $57,000 of your salary. What this means for your tax return is that you probably paid taxes throughout the year based on $60,000 so you have a tax balance paid to the IRS based on $60K. But if you only have to pay taxes based on $57,000 you can see that you have now over paid your annual taxes. With this as the case may be, you would then get a tax return of the excess taxes you paid.

Of course these are examples but they do show the difference between tax credits and tax deductions. We recommend you speak directly to a tax preparer if you have further questions about this.

First Time Buyers and $8000 Tax Credit

If you have been on the fence about whether or not to buy a home, perhaps now is the time. It feels like there has been no time better than in 2009 to purchase a new home in the United States. We’re talking about the $8000 home purchase tax credit for first time home buyers authorized by the Obama Administration with the American Recovery and Reinvestment Act of 2009.

A lot has been written about this first time home buyer tax credit program and we are no exception, however, our angle is a little different. We suggest a plan that should get you from the point of thinking about to a point of getting your keys. Well, not completely, but if you put these few items together you should be able to get yourself into a new home in 2009.

The $8000 Home Purchase Tax Credit Plan – 8 Steps

1. You will need to determine if you are first time home buyer? Have you owned a home that you have lived in the past three years? Generally loan officers and underwriters determine this by looking on your credit report to see if you have had a mortgage in the past three years. If you haven’t then you will likely pass this part of the plan.
2. Get a copy of your credit report with all three scores. You need to make sure your scores are at least 620. You need higher than a 620 to qualify for a FHA home loan.
3. If your scores are less than 620 you will need to improve your credit scores – there are a variety of factors that can lead to low scores.
4. If your scores are higher than 620 then you will need to find a mortgage company to do a mortgage pre-approval with. For many first time home buyers with credit scores just above 620 and little money in the bank to work with an FHA home loan is the best loan program to purchase a home with. The reason for this is that FHA home loans have flexible underwriting guidelines for credit – income – assets. While doing your pre-approval you will want to let your loan officer know that you are a looking to qualify for the federal housing tax credit and that you are a first time home buyer.
5. Down payment and closing cost money – you will need to have at least 3.5% of the sales price for a down payment and around another 3-4% for your closing costs in cash. You can get this from a variety of sources if you are planning on using an FHA home loan. Some of these are: gift from relative, loan from friend/relative/bank, home seller assistance, and/or short term bridge loan from either your FHA lender or through your state housing agency if they offer a short term tax credit loan program.
6. The short term bridge loan tax credit program through your FHA lender is a new program so make sure you ask your loan officer about it.
7. Once your pre-approval is complete, you will have what you need to start searching for a home.
8. Find a home, put in a sales purchase offer and close your loan. That’s it.