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If you benefited from the U.S. Homebuyers Tax Credit in 2009, and now want to apply it to your tax forms prior to April 15, here’s a handy step-by-step guide in doing so — easily and accurately.
The primary takeaway from homebuyers who qualify for the tax credit is this: it is a tax credit and not a tax deduction. In other words, if you complete your taxes and you are due for a $1,000 tax refund and an $8,000 homebuyer tax credit, you’ll get a $9,000 refund. Also, you don’t have to repay the tax credit, unless you sell your home within three years of the purchase date.
To qualify for the tax credit, you need a binding home purchase contract by April 30th — but you do have until June 30th to close on that sale. If you’re a current member of the military, the government is granting you an additional year to claim the tax credit, to June 30, 2011.
Tax-wise, you’ll have to file your tax return on paper to claim the credit. The Internal Revenue Service requires additional documentation, thus making an online filing extremely difficult for the IRS to handle. You can still use tax preparation software from one of the popular tax providers, but you’re still going to have to print your tax return out and send it in to the IRS.
Start by downloading IRS Revised Form 5405 (get it here). Follow the instructions to make sure you qualify for the credit then figure out the amount of your credit.
Dig out Form HUD-1 Settlement Statement (it should be part of your home buying documentation, but you can get a new one here). If you can’t find a HUD-1 form, a certificate of occupancy will be accepted by the IRS.
Include copies of all home purchase contracts, including signatures and names of all parties, the price of the home, the address and the contract date.
Include your Form 1040. Write your bottom line on Form 5405 on the appropriate line on your income tax return. On the 2009 Form 1040 return it’s line 67. One caveat: You can’t claim the homebuyer’s credit with Form 1040EZ.
Once you file all your tax paperwork, it should take about six weeks to receive the actual new home tax credit.
In the fourth quarter of 2009 another 600,000 homeowners found themselves "underwater" or owing more on their mortgages than their homes were worth. In fact, the total number of households in this situation is now over 11 million people or 24 percent of all properties that carry a mortgage. This information, reported by First American Core Logic, a real estate research firm, tells us that many people are still really struggling.
The first choice for many homeowners in this situation is to try to restructure their existing mortgages. However, this can be a very long and painstaking process and many people find that they do not qualify. As a result, more and more people are thinking about walking away from their existing homes and mortgages.
Aside from the moral considerations, which are great, what are the points you need to consider before you think about walking away from a mortgage?
First, you need to understand that this is a huge decision. It might seem like this option would solve a lot of your problems, but in reality, it generally just adds more. Probably the biggest impact is that you will not be able to get a new mortgage for quite some time — five years is typical. This means you need to prepare to be a renter for at least that amount of time.
Your credit score and record will be adversely impacted for about seven years. During that time, your ability to get any other kind of loan will be negatively impacted. Car loans, assuming you can get them, will be at a very high interest rate. Same for any other type of consumer loan. Finally, there may be adverse tax implications as well.
Walking away from a mortgage is certainly not without its costs. If your financial life is going to be impacted for five to seven years anyway, it just might make more sense to hang in there and keep making the mortgage payments. No one can accurately predict what the real estate market might look like in 2015 — perhaps by then your situation could be dramatically different.
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If you've got a timeshare, there may come a time when you want to sell it quickly. Here's how.
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Pending home sales are down and additional declines are expected from abnormal weather conditions, according to the National Association of Realtors®.
Moreover, the abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January 2010, fell 7.6% to 90.4 from an upwardly revised 97.8 in December, but remains 12.3% higher than January 2009 when it was 80.5.
With prolonged bad weather in much of the nation, abnormal swings in housing data is not all that abnormal. The real question that remains to be seen is, what happens when the first time homebuyer tax credit expires at the end of April. Stay tuned…
