Mortgage Updates

Over the last few days I have been fielding calls from would be home buyers about just how this new plan will work.  The news is exciting. 

Yes, you can get the stimulous money refunded from your 2008 taxes.  You don't have to wait until 2009.   Filing an amended 2008 return will speed the funds to you.

More good news... The tax credit is 10% of the sales price up to $8,000. (You knew that already.) That means if you buy a home at $80,000 or more you are entitled to the entire $8,000 credit.  Let's look at some examples. 

If your employer collected lets say... $8,500 from your payroll for Federal Income taxes and you are not entiteled to a refund, then when you file your form 5405 you will get a check for $8,000, as long as you meet the requirements; you buy a home over $80,000 and none of the below apply to you: 

• Your income exceeds the phase-out range. This means joint filers with MAGI of $170,000 and above and other taxpayers with MAGI of $95,000 and above. (Maximum Adjusted Gross Income)
• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You stop using your home as your main home.
• You sell your home before the end of the year. (You have to live in your house as a primary residence.)
• You are a nonresident alien. (You have legal residency status)
• You owned another main home at any time during the three years prior to the date of purchase. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another main home at any time from July 2, 2005, through July 1, 2008. (You have to be a first time home buyer)

So what happens if your employer withheld $9,000 in Federal Income taxes, and with your adjustments you get a refund of $1,000?  In this case the refund is deducted from the $8,000 tax credit.  You will now get back $7,000.  Still not bad.

Steps you can take, if you don't need your dollars immediately after closing.

•   Meet with your tax preparer and ask to be provided with an estimate of your 2009 tax liability based on your income and your new (additional) tax deductions. click here to see 
• Ask your tax professional to work out how many dependents you can claim without underfunding your payroll with-holding.
• Contact your pay rolll and chhange your w-4 to the number provided by your tax preparer. (You can legally increase your dependents over and above your actual dependents to decrease your with holding, as long as you don't end up owing money.)

These are suggestions for your 2009 tax return.  If you are closing escrow on your new home this year, with a little planning you won't have a huge refund due (which you could without the planning) and thereby increase your likely hood of getting the full $8,000 tax credit benefit.

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