Now that you’ve received all of your W-2s and 1099’s, home buyers who purchased a San Mateo home in 2009 are starting to think about their taxes so they can (hopefully) get some money back from the IRS with the home buyer tax credit. Several clients have asked how to claim the home buyer tax credit. Here are some tips.

No e-File Allowed

Because of all of the fraud surrounding the credit, the IRS is not allowing tax payers claiming the home buyer tax credit to e-file because of the additional documentation required.

Additional Documentation Required

Along with your regular tax forms, you must attach Form 5405 with a copy of the HUD-1 Settlement Statement. (You received this from the Title Company when you signed the loan documents at closing.)

Trade Up Home Buyer? More Documentation Required

Remember, to claim the $6,500 trade up home buyer tax credit, home owners must have lived in their primary residences for at least 5 consecutive of the past 8 years and be purchasing a new primary residence.

To prove you’ve been in your home for 5 consecutive years, you will need to provide one of the following covering 5 consecutive years in the last 8 years in addition to Form 5405 and your HUD-1 Settlement Statement:

• Form 1098, Mortgage Interest Statement or substitute
• Property tax records
• Homeowner’s insurance records

Need More Information About Filing the Tax Credit?

Remember, I am a San Mateo Mortgage Advisor helping San Mateo home buyers with their mortgage needs, NOT an income tax specialist. So, for more questions contact your Tax Advisor or visit the IRS webpage.

If you need a recommendation for a tax advisor, send me an email at info@SanMateoMortgageBlog.com and I can recommend someone to you.

Related posts:

1. Top 10 Questions about the Extended and Expanded Home Buyer Tax Credit Part 1
2. California’s New Home Buyer Tax Credit
3. Federal Home Buyer Tax Credit Not Just for San Mateo First Time Home Buyers Anymore
4. Top 10 Questions about the Extended and Expanded Home Buyer Tax Credit Part II
5. Slide Show – Guide to the Extended and Expanded Home Buyer Tax Credit

Recently, I did an online webinar explaining the extended and expanded home buyer tax credit and how San Mateo home buyers can benefit.

What Was Covered?

Some of the things we discussed were

• What is a tax credit?
• Biggest changes to the tax credit for 2010
• Who is eligible to receive the home buyer tax credit
• How much do San Mateo home buyers qualify for?
• Frequently asked questions
• How to claim the tax credit
• The realities of the San Mateo real estate market
• Higher income limit requirements
• Purchase limit requirements

Below you will find the slides for the online webinar. Please feel free to contact me at (650) 520-0915 or email me at info@SanMateoMortgageBlog.com with any questions or for more information.

More Resources Explaining the Home Buyer Tax Credit

Check out our other articles I’ve written about the federal home buyer tax credit

• Top 10 Questions About the Home Buyer Tax Credit Part I
• Top 10 Questions About the Home Buyer Tax Credit Part II

Attend a Webinars or Class

Visit our Class Schedule page for a list of upcoming programs and to sign up to be notified when new programs are scheduled.

Need a San Mateo Mortgage Loan?

Call me at (650) 520-0915 or email me at info@SanMateoMortgageBlog.com to schedule an in person or phone consultation. We’ll take a look at your financial situation and help you determine which loan program is best for you. If you’d like to get a jump start on the process, you can fill out our secure online mortgage application or quick loan application and someone will contact you to schedule an appointment.

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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

Related posts:

1. Slide Show – Qualifying for a Mortgage Loan
2. Top 10 Questions about the Extended and Expanded Home Buyer Tax Credit Part II
3. Top 10 Questions about the Extended and Expanded Home Buyer Tax Credit Part 1
4. Webinar: Guide to the Home Buyer Tax Credit – Not Just for First Time Home Buyers Anymore
5. City of San Mateo First Time Home Buyer Loan Program

In my last post I covered the Top 5 questions about the extended home buyer tax credit from San Mateo borrowers. Today I’m going to round out the top 5 individual questions and answer the most popular question… how you can claim the home buyer tax credit.

Are there Any Price Restrictions?

Yes. One major change from the 2009 credit is the purchase price limit, which is $800,000. This purchase price limit is in place for San Mateo first time home buyers and move up buyers.

Can You Claim your Credit in Advance?

No. Why? The IRS is trying to protect against fraud and has started to prosecute people who claimed the credit on their 2008 taxes and then never actually went through with a purchase.

There has been some discussion about allowing access to the home buyer tax credit in advance to use for a down payment, but there is nothing official. However, if this comes to fruition, I will be sure to post here on the SanMateo Mortgage Blog.

One Way to Get Access to the Money Earlier

One way for a San Mateo borrower to gain access to your expected home buyer tax credit earlier is to adjust you W-4 withholding in anticipation of your 2010 credit. This is adjusting how much your employer will take out of your paycheck for taxes. Caution! Before you do this, I would speak to a tax advisor to see how this will affect you at the end of the year. If you don’t have a tax advisor, I would be glad to refer one to you.

Can You Claim the Credit if the Seller is Financing Part of Your Purchase and Retains Title to the Property?

Seller financing is a loan provided by the seller of a property to the buyer to cover all or part of the sales price for the property. You would still be able to claim the credit in this scenario if you can demonstrate ownership of the property by:

• Right of possession
• Right to obtain legal title upon full payment of purchase price
• Right to construct improvements
• Obligation to pay property taxes
• Responsibility to insure the property
• Duty to maintain the property

Can You Purchase a Home from a Step Relative and Still be Eligible for the Credit?

Yes, as long as the person you purchaser from is not a direct blood relative. The reason for this is to protect against fraud. The IRS doesn’t want a father selling his home to his son just to receive the $8,000 home buyer tax credit.

Can You Claim the Home Buyer Tax Credit if You Purchase with a Non-Occupant Co-Borrower?

Some loan programs will allow you to have a non-occupant co-borrower on the loan to help qualify. A non-occupant co-borrower does not live at the property but is merely a co-signer to help you qualify for a purchase. You can claim the credit as long as the co-borrower is a parent and they do not live at the property.

Finally we get to number 10 and the most asked question……

How Do I Actually Claim my Credit?

For those who purchased a home in 2009, you may choose to either apply for the credit on your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 return using Form 5405. You can access the 5405 form here.

For 2010 home purchases you can claim the credit on your 2010 return or you can apply for the credit sooner by amending your 2009 return with Form 5405. The 2009 5405 form will not be available until December and can only be used on purchases after November 6, 2009.

When you file your tax return make sure you include your HUD-1. Your HUD-1 Settlement Statement is the standard form which is used to itemize services and fees charge to the borrower by the lender or the broker. These are all the cost related in the purchase of your home.

Why is Now a Great Time to Be a San Mateo Home Buyer?

Now is a great time to be a San Mateo home buyer. We still have historically low interest rates and San Mateo home prices are still at reasonable levels. Having the tax credit extended into the first half of 2010 should be a great benefit for those who were waiting for the holidays to get serious about their San Mateo home search.

Have More Questions? Call or Email Me!

If you have additional questions about the home buyer tax credit, feel free to give me a call at (650) 520-0915 or email me at info@SanMateoMortgageBlog.com. However, I would suggest that you speak to a tax advisor to discuss how the tax credit can benefit you. If you need a recommendation, I would be glad to give you the names of some great tax professionals.

How Much Can You Afford?

Contact me at (650) 520-0915 or info@SanMateoMortgageBlog.com to schedule a no obligation consultation where I will take a look at your financing situation and help you understand how each aspect of your financial package (credit, income and assets) impact your ability to qualify for a San Mateo mortgage loan.

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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

Related posts:

1. Top 10 Questions about the Extended and Expanded Home Buyer Tax Credit Part 1
2. Slide Show – Guide to the Extended and Expanded Home Buyer Tax Credit
3. How to Claim the Home Buyer Tax Credit
4. California’s New Home Buyer Tax Credit
5. Webinar: Guide to the Home Buyer Tax Credit – Not Just for First Time Home Buyers Anymore

Since the home buyer tax credit was extended into the first half of 2010 on November 6th of this year, I have been receiving the same questions from clients about the details of the credit. I thought this would be the perfect opportunity to list the top ten questions with answers for San Mateo County borrowers about the expanded and extended home buyer tax credit.

What exactly is a ‘Tax Credit’?

A tax credit is a dollar for dollar reduction in the taxes you owe the IRS. For example, if you are eligible for the full tax credit of $8,000 and you owe $10,000 in taxes, you subtract the $8,000 from what you owe. Instead of owing $10,000 in taxes, you would then owe only $2,000.

Example

If you don’t owe any taxes, the IRS will issue you a check for $8,000 (if you’re eligible for the full amount) plus any additional refund the IRS owes you.

What are the Biggest Changes for 2010?

Income Limits Increased

Besides the tax credit being extended until June 30, 2010, the income limits have also been increased. The new income limit for single filers is $125,000 (up from 2009 limit of $75,000) to receive the full credit of $8,000 in San Mateo County. If you make more than $125,000, your tax credit starts to phase out. If you make $145,000 or more (2009 max was $95,000), you are not eligible for the home buyer tax credit.

For married or joint filers, the income limits are set at $225,000 to receive the full $8,000 credit in San Mateo County. This is up from $150,000 in 2009. If you make more than $225,000, the credit begins to phase out up to $245,000 where you are no longer eligible to receive the credit.

2010 Income Limits to Be Eligible for Home Buyer Tax Credit

Current San Mateo Home Owner’s Buying a New Primary Residence Now Eligible

Another change for 2010 is that the tax extension bill now offers an incentive for non first time homebuyers to purchase a new home in 2010. The max tax credit for homeowner’s buying a new primary residence is $6,500.

Who is Eligible for the Home Buyer Tax Credit?

You are eligible for the $8,000 home buyer tax credit if you are a first time homebuyer or somebody that has not owned a primary residence in the last 3 years. You would even be eligible for the home buyer tax credit if you own an investment property or a second home but have not owned a primary residence in the last 3 years.

If you currently own a home and buy a new primary residence, you would be eligible for the $6,500 tax credit if you have occupied your current primary residence for any 5 consecutive years during the last 8 year period.

What are the New Deadlines to Claim the Home Buyer Tax Credit?

The new rules and extension went into effect November 7th, 2009. To take advantage of the tax credit, you must have an accepted contract no later than April 30, 2010 and close your transaction by June 30, 2010.

If you’re a member of the Military, Foreign Services or Intelligence Agency, you will be eligible for a 1 year extension if you were out of the country for at least 90 days between December 31, 2008 and May 1, 2010. With this extension in place, you must have an accepted contract dated no later than April 30, 2011 and close your transaction before June, 30 2011.

Does the Home Buyer Tax Credit have to be Repaid?

The home buyer tax credit does have a repayment trigger if you sell your home within 3 years of buying it. If you sell in the first year, the entire tax credit must be repaid and there is a partial repayment for years 2 and 3. If you live in the home longer than 3 years, you will not have to repay the credit.

Stay Tuned for Part II of the Home Buyer Tax Credit FAQ’s

These are the first 5 of the most basic frequently asked questions by San Mateo home buyers. In my next post I will complete the top ten list and cover some more specific questions from individuals.

Have Specific San Mateo Mortgage Questions?

In the meantime, if you have any additional questions regarding the home buyer tax credit, or if you want to see how the tax credit affects you as a San Mateo home buyer, give me a call at (650) 520-0915 or send me an email at info@SanMateoMortgageBlog.com.

Considering Buying a Home in San Mateo County?

Call me at (650) 520-0915 or email me at info@SanMateoMortgageBlog.com to schedule a free, no obligation in person or phone consultation to examine your finances and help you determine how much you can afford.

Enjoyed this Post? Why Not Subscribe?

If you have enjoyed San Mateo Mortgage Blog – Bay Area Mortgage Broker, please subscribe to our RSS feed.

Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

Related posts:

1. Top 10 Questions about the Extended and Expanded Home Buyer Tax Credit Part II
2. Slide Show – Guide to the Extended and Expanded Home Buyer Tax Credit
3. How to Claim the Home Buyer Tax Credit
4. Federal Home Buyer Tax Credit Not Just for San Mateo First Time Home Buyers Anymore
5. California’s New Home Buyer Tax Credit

The other day I received a question from Tyler who was wondering why consumers are concerned about refinancing into lower interest rates when they don’t have to pay mortgage interest. Tyler explained that he thought all mortgage interest was tax deductible and reduced the amount of taxes you paid.

Unfortunately, the reality of tax deductions is they reduce your taxable income, or the amount of income subject to income taxes, not the amount of taxes you actually pay to Uncle Sam. Let’s say you make $100,000 annually and you paid $20,000 in mortgage interest. Because of the $20,000 you paid in mortgage interest, you can reduce your taxable income to $80,000. If you are in the 28% tax bracket, you will see approximately $5,600 in tax savings (28% of $20,000 = $5,600), not the entire $20,000.

Unfortunately, the reality of tax deductions is they reduce your taxable income, or the amount of income subject to income taxes, not the amount of taxes you actually pay to Uncle Sam. Let’s say you make $100,000 annually and you paid $20,000 in mortgage interest. Because of the $20,000 you paid in mortgage interest, you can reduce your taxable income to $80,000. If you are in the 28% tax bracket, you will see approximately $5,600 in tax savings (28% of $20,000 = $5,600), not the entire $20,000.

Thanks again Tyler for your question. As always, the forum is open to all questions and comments. Feel free to use me as a financial resource.

Thursday’s post will answer the refinance portion of Tyler’s question. We will discuss why a person may choose not to refinance and a few reasons people do not have the ability to refinance.

If you have enjoyed San Mateo Mortgage Blog – Bay Area Mortgage Broker, please subscribe to our RSS feed.

Related posts:

1. Mortgage Interest: A Friend to the Bay Area Home Owner
2. How Mortgage Interest Rates Affect Your Monthly Payment
3. Two New Tax Breaks for the Struggling Bay Area Homeowner
4. One Last Chance to Refinance at Historic Low Interest Rates
5. Why Some Home Owners Decide not to Refinance