Saving energy doesn’t only help the environment.  It also helps your checkbook when those monthly bills come in, and could possibly mean a helpful deduction come next April.  Yes, there are tax credits available for saving energy that could be good for up to $1,500 – and some possibly beyond that.

Part of a federal stimulus package passed last year, The Existing Home Retrofit Tax Credit covers a wide variety of options in regards to home-improvement projects resulting in energy savings.  Installing certain types of windows in your St Petersburg home could make you eligible.  Upgrading your air conditioning system or switching to alternative energy sources could mean even higher potential tax credits.

The available credit for upgrading to approved energy efficient products like insulation, siding, doors, windows, roofing, etc. is 30% of the cost (excluding installation) up to $1,500.  For example, if an owner replaced windows and insulation in their St Petersburg home for a total materials cost of $4,000, the tax credit could reduce the cost to $2,800. 

Please keep in mind – this is tax law.  There are always details and exclusions.  To make sure you get the most out of the available credits, contact your tax professional before embarking on a project.  To get more information on these available credits, please visit EnergyStar.gov, or NAHB.org/efficiencytaxcredit.

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There are two forms of the Federal Tax Credit: the $8k and $6.5k.  We’ll use some sample scenarios involving a St Pete Beach home to help illustrate.

The first option:

Let’s start with the $8k option. This is a tax credit for FIRST-TIME BUYERS ONLY. However, the way the IRS defines “first-time buyers” is this: “a buyer who has not owned a principal residence during the three-year period prior to the purchase.” This means that if you have owned before, but not in the last three years, you are again a first-time buyer. The credit amount is 10% of the total cost of the home, up to $8,000, and it only applies to homes that are less than $800k. This offer began January 1st, 2009 and will expire April 30th, 2010.

For example - A sample of the simplest scenario.  You’ve been renting for years and have finally decided to take the plunge – now is the time to buy!  You’ve found a fantastic St Pete Beach home in the form of a condo on Gulf Boulevard.  Your offer has been accepted and you’re under contract to close on April 5th for $249,000.  You qualify!

Another example – You owned your St Pete Beach home until 2005, when it was sold due to your relocation.  Upon relocating, you rented for a few years instead of purchasing.  Now back in the area, you’ve found a great opportunity to purchase a waterfront property in Yacht Club Estates.  The contract has been finalized and you’re closing on April 19th at $699,000.  You qualify!

The second option:

The other form of Federal Tax Credit is the $6.5k. This credit applies to those who currently own a home, and have lived in that home as a primary residence for at least 5 of the last 8 years. Like the $8k form of credit, it also only applies to houses which cost less than $800k, and is calculated as being 10% of that total cost. The only difference is the ceiling on this policy is $6,500. This offer began November 6th, 2009, and will expire April 20th, 2010.

For example - You purchased your St Pete beach home in 2001.  It was your primary residence from 2001 to 2004, when you purchased another property in Old Northeast which then became your primary residence.  Ownership of the residence in St Pete Beach was maintained while it was rented for a few years.  In 2006, you moved back into the beach home as your primary residence.  You’ve now found a fantastic new opportunity to purchase the home of your dreams on Snell Isle which you have under contract to close on April 12th at $725,00.  Despite the fact that you currently own a home, you still qualify!

In order to claim this credit, make sure you do so when filing your income tax returns. Both the $8k and $6.5k versions of the credit require IRS Form 5405, which will aid in determining the amount of tax credit to be received. In order to be eligible the property must close before July 1st.

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Prices did rise in 30 of the 153 metro areas so that is a glimmer of hope, but the overall sales were on the lower end of the marketplace and directly related to the stimulus.

via NAR & therealestatebloggers.com

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The legislation also would extend the $8,000 homebuyer tax credit to contracts signed by April 30 and closed by June 30. The controversial credit, which many say has boosted home sales in recent months, was set to expire after Nov. 30.

The bill also creates a $6,500 credit for those who buy a home after living in their current house at least five years. That measure would apply to contracts signed by April 30 and closed by June 30. The current credit defines a first-time homebuyer as someone who has not owned a residence within the past three years.

The credit would be available only for the purchase of principal residences priced at $800,000 or less.

The bill would raise the adjusted gross income cap to $125,000 for single filers and $225,000 for joint filers. The amount of the credit currently begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

“It’s gonna put people back to work, the home builders, put people in the real estate business,” said Sen. Chris Dodd, D-Conn. “The kind of jobs that can make a difference.”

The extension will cost $10.8 billion over 10 years, according to the Joint Committee on Taxation.

Through mid-September, 1.4 million tax returns had qualified for the credit, according to the IRS. Some portion of those returns, which the IRS couldn’t specify, represents buyers who took advantage of an earlier version of the tax credit, which was only worth $7,500 and has to be repaid over time.

By the end of November, the credit will have been used by 1.8 million homebuyers, at least 355,000 of whom would not have bought a house without the tax break, according to estimates by the National Association of Realtors.

“The data on the present home buyer tax credit show that the credit has had its intended impact — sales have jumped in recent months to a projected 5.1 million for the year and housing inventory has been trimmed, thus stabilizing home prices noticeably,” said Ron Phipps, the association’s first vice president, in Senate testimony last month.

The credit, however, has also posed many problems. Critics say it’s a waste of money because most of those claiming the credit would have bought homes anyway.

It’s also been the target of fraud. Some 74,000 people claimed more than $500 million in credits even though they may not be first-time homeowners, according to Treasury officials. And more than 580 children, including some as young as 4-years-old, have claimed the credit.

“Some key controls were missing to prevent an individual from erroneously or fraudulently claiming the credit and receiving an erroneous refund of up to $8,000,” said J. Russell George, Treasury inspector general for tax administration, before a House subcommittee last month

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The tax credit that has helped lift home sales expires in just over two months, and the National Association of Realtors wants it extended.

The $8,000 first-time homebuyer credit will expire November 30, giving any buyers hoping to take advantage of it a very short window to qualify, when factoring in the time it takes to find a property and to close on its sale.

“Now is the time for Congress to keep this recovery going by extending the tax credit through 2010 and making it available to more homebuyers, says NAR president Charles McMillan. “The credit needs to be available for an additional period of time in order to sustain the progress that’s been made so we can continue to see our markets fully recover.”

The first-time buyer credit, which was implemented earlier this year, has brought 1.2 million new buyers into the market, the NAR estimates. It says 350,000 of those buyers would not have purchased a home without the credit.

Do you have questions regarding your eligibility or are you interested in talking to a mortgage professional regarding purchasing a home?  Smith & Associates is here to help!  Please click here to get in touch with a mortgage consultant.

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Realtors group calls for tax credit extension

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The government’s first time homebuyer $8,000 tax credit has helped stimulate home sales, but buyers still hoping to take advantage of it will have to beat the clock.

The tax credit expires Nov. 30, giving buyers about 12 weeks to find, contract and settle on their purchase. The National Association of Realtors says on average, first-time buyers search 12 weeks to find a home, and closing can take up to 60 additional days.

The group says buyers still hoping to qualify for the credit will have to act quickly.

“By moving quickly, being prepared to make decisions in the face of increased competition, and [learning] from others to reduce time without cutting corners, first-time homebuyers starting today can close on time and quality for the $8,000 federal tax credit,” says Errol Samuelson, president of Realtor.com.

The tax credit was cited as the most important reason for buying by 10.8 percent of current homebuyers in a Realtor.com survey. An estimated 1.4 million buyers have already filed for the credit, with that number likely to swell by the time tax returns are due next April.

Do you have questions regarding your eligibility or are you interested in talking to a mortgage professional regarding purchasing a home?  Smith & Associates is here to help!  Please click here to get in touch with a consultant.

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First time buyers face deadline

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