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Carver Communications - Index

Carver Communications - 101508 - Index

By Keith Fahey
Centex Homes
It is a good time to buy a home in San Antonio?
It seems like all we are hearing about
these days are negative real estate articles in
the national and to a lesser extent the local
press. While real estate is having problems
around the country, it is still a good time to buy
a home in San Antonio. There are many reasons
for this: The SA economy continues to
create jobs at an annual pace of 16,00018,000.
Our population is growing by more
than 50,000 individuals a year. Our homes
have experienced slow but steady appreciation
in the 3-5% range. Our costs of building and
home prices are some of the most affordable in
the nation. Plus if, you are a first time buyer, it
is an especially good time to buy a home. This
is due to the $7500 tax credit, for first time
buyers, which was included in the recent
Housing and Economic Recovery Act of
2008. Below are some of the frequently asked
questions and answers to those questions
Who is eligible to claim the $7,500
tax credit?
First time home buyers purchasing any
kind of home—new or resale—are eligible for
the tax credit. To qualify for the tax credit, a
home purchase must occur on or after April 9,
2008 and before July 1, 2009. For the purpos-
es of the tax credit, the purchase date is the
date when closing occurs.
What is the definition of a first-time
home buyer?
The law defines "first-time home
buyer" as a buyer who has not owned a principal
residence during the three-year period
prior to the purchase. For married taxpayers,
the law tests the homeowner-ship history of
both the home buyer and his/her spouse. For
example, if you have not owned a home in the
past three years but your spouse has owned a
principal residence, neither you nor your
spouse qualifies for the first-time home buyer
tax credit. Ownership of a vacation home or
rental property not used as a principal residence
does not disqualify a buyer as a firsttime
home buyer.
How do I claim the tax credit?
Participating in the tax credit program
is easy. You claim the tax credit on your federal
income tax return. No other applications or
forms are required. No pre-approval is necessary;
however, prospective home buyers will
want to be sure they qualify for the credit
under the income limits and first-time home
buyer tests.
October 15, 2008 REAL ESTATE NEWSLINE 29
What types of homes will qualify for
the tax credit?
Any home purchased by an eligible
first-time home buyer will qualify for the credit,
provided that the home will be used as a
principal residence and the buyer has not
owned a home in the previous three years.
This includes single-family detached homes,
attached homes like townhouses and condominiums,
manufactured homes (also known
as mobile homes) and houseboats.
What is "modified adjusted gross
income"?
The single buyers MAGI income has
to be less than $75,000 and for couples it is
$150,000. Modified adjusted gross income or
MAGI is defined by the IRS. To find it, a taxpayer
must first determine "adjusted gross
income" or AGI. AGI is total income for a year
minus certain deductions (known as "adjustments"
or "above-the-line deductions"), but
before itemized deductions from Schedule A
or personal exemptions are subtracted. On
Forms 1040 and 1040A, AGI is the last number
on page 1 and first number on page 2 of
the form. For Form 1040-EZ, AGI appears on
line 4 (as of 2007). Note that AGI includes all
forms of income including wages, salaries,
interest income, dividends and capital gains.
Does the credit amount differ based
on tax filing status?
No. The credit is in general equal to
$7,500 for a qualified home purchase, whether
the home buyer files taxes as a single or married
taxpayer. However, if a household files
their taxes as "married filing separately" (in
effect, filing two returns), then the credit of
$7,500 is claimed as a $3,750 credit on each of
the two returns.
Are there any circumstances for
which buyers whose incomes are at or
below the $75,000 limit for singles or the
$150,000 limit for married taxpayers might
not be able to claim the full $7,500 tax credit?
In general, the tax credit is equal to
10% of the qualified home purchase price, but
the credit amount is capped or limited at
$7,500. For most first-time home buyers, this
means the credit will equal $7,500. For home
buyers purchasing a home priced less than
$75,000, the credit will equal 10% of the purchase
price.
What is the difference between a tax
credit and a tax deduction?
A tax credit is a dollar-for-dollar reduction
in what the taxpayer owes. That means
that a taxpayer who owes $7,500 in income
taxes and who receives a $7,500 tax credit
would owe nothing to the IRS. A tax deduction
is subtracted from the amount of income
that is taxed. Using the same example, assume
the taxpayer is in the 15 percent tax bracket
and owes $7,500 in income taxes. If the taxpayer
receives a $7,500 deduction, the taxpayer’s
tax liability would be reduced by $1,125
(15 percent of $7,500), or lowered from
$7,500 to $6,375.
Does the credit have to be paid back
to the government? If so, what are the payback
provisions?
Yes, the tax credit must be repaid.
Home buyers will be required to repay the
credit to the government, without interest,
over 15 years or when they sell the house, if
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