Before addressing repayment a brief look at the history of the homebuyer tax credit:

The original tax credit established in July of 2008 was for a maximum of $7,500 for qualified first-time homebuyers who purchased a principal residence after April 8, 2008 and before January 1, 2009 (originally before July 1, 2009 prior to modification).

In February of 2009 the maximum amount of the tax credit was increased to $8,000 for qualified buyers effective for purchases after December 31, 2008 and before December 1, 2009.

In November of 2009 the date for qualifying purchases was extended to before May 1, 2010.  A separate deadline was established extending the closing date to before July 1, 2010 for binding contracts executed before May 1, 2010.  A third version of the tax credit was also established at this time.  This was a maximum credit of $6,500 for qualified long-term residents who purchased a principal residence after November 6, 2009 and before May 1, 2010 with the same closing date requirement.

In June of 2010 the closing deadline was extended from before July 1, 2010 to before October 1, 2010.   

Repayment of the homebuyer tax credits:

2008 Purchases:  If you claimed the credit for a home purchased in 2008, you generally must begin repaying it on your 2010 return.  The 2008 homebuyer tax credit is required to be repaid evenly over a period of 15 years, starting in 2010.  If the home ceases to be your main home before the 15-year period has elapsed, you must include the remaining unrecaptured balance of the credit as additional tax on the return for that year.  There are exceptions to the accelerated repayment rule which are listed below.    

Exceptions:

• In the case of the sale of the home to a person who is not related to you, the repayment is limited to the amount of the gain, if any, on such sale.  However, when calculating the gain, you must reduce the adjusted basis of the home by the amount of the credit.
• If the home is destroyed, condemned, or disposed under the threat of condemnation and you purchase a replacement home within two years of the event, you continue to repay the credit in installments each year.
• If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for making the rest of the repayments.
• If you die no further payments are due.  If you claimed the credit on a joint return, your surviving spouse pays only his or her half of the rest of the repayments.
• In some cases, there is an exception for members of the uniformed services or Foreign Service and for intelligence community employees.

2009 & 2010 Purchases:  If you claimed the credit for a home purchased in 2009 or 2010, the credit is not required to be repaid unless the home ceases to be your main home within 36 months of the date of purchase.  If the home ceases to be your main home within the 36-month period, you must include the credit as additional tax on the return for that year.  There are exceptions to the repayment rule which are listed below.  You do not need to repay the credit as long as the home remains your main home for the three years after the purchase.

Exceptions:

• In the case of the sale of the home to a person who is not related to you, the repayment is limited to the amount of the gain, if any, on such sale.  However, when calculating the gain, you must reduce the adjusted basis of the home by the amount of the credit. 
• If the home is destroyed, condemned, or disposed under the threat of condemnation and you purchase a replacement home within two years of the event, you do not have to repay the credit.
• If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit if required.
• If you die repayment of the credit is not required.  If you claimed the credit on a joint return, your surviving spouse must repay his or her half of the rest of the credit if required.
• In some cases, there is an exception for members of the uniformed services or Foreign Service and for intelligence community employees.

IRS Notice CPO3A (2008 credit), IRS Notice CPO3B (2009 & 2010 credit) and IRS Form 5405:

Each year the IRS will notify taxpayers who claimed the homebuyer tax credit of the repayment requirements.  The letters explain if and when you have to repay the credit.  There are different IRS letters for different situations, including a purchase of a home in 2008, 2009 or 2010, a sale of a main home, or change in the use of a main home.  IRS Form 5405 is used by the tax payer to report all homebuyer tax credit related transactions (credits, repayments and any changes in the use of the home).

Additional information on the homebuyer tax credit and repayment requirements is available on the IRS website, www.irs.gov.   An informative summary can be found on the IRS’s newsroom page at the URL www.irs.gov/newsroom/article/0,,id=204671,00.html.

Taxpayers are urged to consult a professional advisor for advice on all tax matters including homebuyer tax credits and related repayment requirements.  While the information contained herein is deemed to be accurate and reliable it should not be relied upon as professional tax advice or services.

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With the Davenport NOW program there has never been a better time to make Davenport your home.  Davenport NOW was passed by Alderman to improve economic development, as well as provide more opportunities to small business owners in the construction and remodeling fields.

As of August 2010, Davenport NOW has assisted with 160 projects, with a city investment through real estate tax rebates of more than $750,000. Properties in the program have also increased in assessed value by $27,880,539. 

In August of 2010, the Davenport City Council approved the expansion of the Davenport NOW program to include a special program for historic properties, which provides an additional tax benefit to homeowners completing historic improvements to their property.  Applicants can receive a rebate on the value of the improvements of up to 100% of the city’s share of your property taxes for 10 years.   Under both programs, eligible participants may choose a single one-time payment or multiple payments over ten years.

To qualify for the Davenport or Historic Davenport NOW programs this is some of the criteria:

• The property must be in a local or national historic district or listed on the national registry of historic properties.
• The property must be a single family, owner occupied home.
• Improvements must lead to a minimum $5,000 increase in assessed value.
• Exterior improvements must receive a certificate of appropriateness from the Davenport Historic Preservation Commission.  City staff can assist you in submitting your improvements for approval.
• The home must be built as new construction or purchased new.

According to City ordinance, both business and residential property owners may be eligible, as long as the owner occupies the structure.  Rental property improvements may also be eligible, but not new rental properties or those converting owner-occupied structures into rental properties.

For more information or to see if you qualify, contact the City of Davenport at 563-888-3380 or CityofDavenportIowa.com.

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Leave the deerstalker hat and magnifying glass behind. All you’ll need for energy sleuthing is a flashlight, screwdriver, paint stirrer, tape measure, and—not just for serenity’s sake—a stick of incense.
 
1. Hunt down drafts. Hold a lit stick of incense near windows, doors, electrical outlets, range hoods, plumbing and ceiling fixtures, attic hatches, and ceiling fans in bathrooms—anywhere drafts might sneak in. Watch for smoke movement. Note what sources need caulk, sealant, weather-stripping, or insulation.

2. Check attic insulation. Winter or summer, insulation does the most good when it’s overhead, so start with the attic. First, do you have insulation? If the insulation you see covers the tops of the joists by several inches, you probably have enough. If the insulation is only even with the tops of the joists, you probably need to add insulation.

3. Check wall insulation. Remove electrical outlet covers to see if your wall contains insulation. Shut off power to the receptacle before probing beside the electrical box with a wooden paint stirrer. Check some switch boxes as well. Their higher wall location lets you see if blown-in insulation has settled.

4. Look for stains on insulation. These often indicate air leaks from a hole behind the insulation, such as a duct hole or crack in an exterior wall. Seal gaps with caulk or spray foam insulation.

5. Inspect exposed ducts. Look for obvious holes and whether joints are sealed. Heating, ventilation, and cooling (HVAC) ducts are made of thin metal and easily conduct heat. Consider insulating them. Uninsulated or poorly insulated ducts in unconditioned spaces can lose 10% to 30% of the energy used to heat and cool your home.

6. Check anything that goes through an exterior wall. Examine dryer ducts, plumbing lines under sinks and vanities, anything that pierces a wall. Any gaps around it should be sealed with spray foam insulation or caulk.

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Provided By: House Logic

The Pending Home Sales Index, a forward-looking indicator, rose 5.2% to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1% below July 2009 when it was 98.1. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, cautioned that there would be a long recovery process. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” he said. “But the recovery looks to be a long process. Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”

Yun added, “Affordability could reach a generational high in the second half of this year because of rock-bottom mortgage interest rates, helped partly by the Fed’s very accommodative monetary policy. The loan underwriting standards are tighter, but home buyers can improve their chances of getting a loan by staying well within their budget.”

The PHSI in the Northeast rose 6.3% to 62.5 in July but is 21.1% below a year ago. In the Midwest the index increased 4.1% to 66.7 but remains 25.7% below July 2009. Pending home sales in the South rose 1.2% to an index of 86.3, but are 15.6% lower than a year ago. In the West the index jumped 11.6% to 95.0 but is 17.6% below July 2009.

The national index had fallen 29.9% in May and another 2.8% in June.

For more information, visit www.realtor.org.

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Courtesy of: RisMedia

With all the confusion and controversy we do have a better explanation! 

Effective January 1, 2013, singles with annual gross income over $200,000, and married couples with annual gross income over $250,000 will have to pay 3.8% tax on profit from the sale of their property. This is not an income tax.  All revenue collected by tax is dedicated to the Medicare hospital insurance program.  This tax doesn’t apply to everyone, but it WILL apply to those that profit on the sale of their home. 

The up to $500,000 exclusion of gain for married couples (or up to $250,000 for single taxpayers or those who file a separate tax return) has not changed.  If you have owned and lived in your home for at least two full years within the five years before the home is sold, you will be able to take the appropriate exclusion.

For example, your adjusted gross income is $150,000.  You sell your house and make a profit of $400,000.  There is no change in the way you determine your gain.  You take your purchase price, add major improvements you have made and subtract that number from the net sales price.  If you have lived in your home for at least two out of the last five years, you are eligible to exclude all your profit.

The new tax only applies to home sale gains in excess of the $250,000/$500,000 that push the individual or couple over the annual gross income level of $200,000/$250,000 limit.  Everyone’s situation is different.  Please consult your tax professional or attorney to determine your qualifications.  Click here for more information from the National Association of Realtors.  Or visit IRS.gov

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The legislation is designed to create a seamless extension to the new closing deadline for an eligible transaction.  There would be no gap between June 30 and the date the President signs the bill into law, which he is anticipated to do so this week.

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The House of Representatives voted overwhelmingly this afternoon to pass legislation containing an extension and expansion of the homebuyer tax credit, completing Congressional action and sending the tax credit to President Obama for his signature, possibly as early as tomorrow.

The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close.  First-time buyers who are in process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.

For the first time, the new legislation makes buyers who already own a home eligible for a credit.  A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years.  The legislation limits eligibility for the existing homeowner credit  to homes worth $800,000 or less.

The program, known as Davenport NOW, rebates 50 percent of the city’s portion of taxes on new assessed value for construction of more than $5,000, which includes additions to existing structures, for 10 years.

According to the ordinance, both businss and residential property owners are eligible, as long as the owner occupies the structure. Rental property improvements also will be eligible, but not new rental properties or those converting owner-occupied structures into rental properties.

Proponents said the program was a good incentive for new construction. That means more business for a myriad of small business, said Mayor Bill Gluba.

“It’s pretty simple,” he said. “We’re going to lower the taxes of people who improve our city.”

Ald. Nathan Brown, 1st Ward, who cast the only vote in opposition, echoed complaints that the program will help people fix up homes but does nothing for those who always have kept their properties in good shape.

“This is saying, “Welcome to Davenport. We”ll lower your taxes if you”re new,” he said.

The city gets about 40 percent of property taxes, with school districts receiving about 50 percent and the last 10 percent going to various places. The city’s tax rate is 15.58 percent, which would be cut in half for those qualifying under the Davenport NOW program.

Davenport NOW cannot be used with any other city economic development programs.

“This might be one way people can fix up their homes or historical buildings,” said Ald. Jeff Justin, 6th Ward. “The council as a whole wants lower taxes for everyone. I know I do.”

Article taken from Quad City Times.  Click here to view the full article.

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