Saving money.... ouch... In today's market, not as easy for some depending on their situations. I know some people that make a good living, but that they have a large family to support. Sure, define a good living, which would be different for each one of us. But the bottom line is that many of us could use help one way or another when it comes to buying a home.
I wrote a post a few weeks ago about the tax credit for first time homebuyers and giving insight of what it was all about. Before I go further about this tax credit, let's define first time homebuyer. It is someone that has not owned a home in the last 3 years from July 2, 2005, through July 1, 2008. And just a FYI, this tax credit is still good for anyone that buys a home prior to July 1, 2009.
Now, did you realize that you could actually use this first time homebuyers tax credit prior to actually buying a home and filing your tax returns? That's right, you heard it correctly, you can actually tap into this tax credit prior to buying your new home. The 7500 Tax Credit can be a great tool in buying.
So, the main question is : As a first time homebuyer, is there a way that I can access the monies allocated for the tax credit sooner, prior to filing my taxes and buying the home?
The answer to this is YES.... But how? If you believe that you are buying a home prior to the deadline date of July 1st, 2009, you can actually reduce your income tax withholdings. You can actually reduce your tax withholdings, up to the amount of the credit allowed, which will allow you to accumulate cash. This is done by raising your take home income, in which the money accumulated can then be applied to the purchase of your new home.
I am not a tax accountant, so it is mandatory that you speak to your accountant. But you would need to adjust your withholdings amount on your W-4 through your employer or if self-employed, through your quarterly estimated tax payments. Here are the rules and guidelines for your income tax withholdings. IRS publication 919 in how to adjust your withholdings. Keep in mind, if you don't use this money, you will have to repay it back. Overall, the 7500 tax credit should be thought about when buying a new home.
FYI - The seller-funded DPA's are back on the talking blocks. For more information in obtaining your dream home, please read : Part 2 - Seller-funced down payment assistance programs might appear again.
Update March 28th, 2009 - $8,000 first time homebuyers tax credit
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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc
Jeff - You and I are birds of a feather my friend. I've been telling that to my low-medium income first timers for awhile. Of course, I always tell them to talk to their tax consultant to find out exactly how much they can afford to tweak their withholdings.
I still get a little amazed at the ones who are reluctant to to do that because then they're afraid they won't get a big return when they file like they always do. I then explain to them that the object is to not get a big return when you file. All that means is that Uncle Sam had your money all year long, interest free. I explain to them that the object is to get as little as possible back.
Personally, I would rather pay $500 then get $500 back. That way I know I had my money all year long, interest free.
Jeff - that is a good idea. Have not heard anyone recommened that approach as of yet. Certainly is a great opportunity for first time homebuyers. I have a sneaky suspicion that in the new stimulus package that same credit will be opened up to all purchasors ! What do you think ? ~ Chris
DONNE... . and I kill myself at times, because I should have written about this earlier, but I always got sidetracked with other current topics. But this is good advice even if you aren't going to use the tax credit. It's just something that you need to be precise about, otherwise, you are giving money back at the end of the year. Many people would rather just break even or get money back. Thanks for the feedback.
CHRIS & STEPHANIE.... . I actually haven't either, hence why I wanted to bring it up. Most people would only have 4 to 5 months left to do this, but it can help many.
In regards to the fact that this could be opened up to those that aren't first time homebuyers? I just don't see it happening, for several reasons. But that is my .02. thanks
Jeff - Great info, my man. Knowledge is indeed power and this kind of stuff allows the consumer to wield a mighty sword.
Why wouldn't you see this happening for folks who aren't first time homebuyers? Color me curious on that... though I don't disagree.
Jeff - once again some good information. Seems like a smart approach for those who get it. Talking to an accountant is always a smart idea before making this sort of decision. I expect we will be seeing other changes that will impact buyers in months to come.
Jeff
Jeff- Great information. My idea is that first time home owners are where it's at now. I'd love to reblog this info for them.
What happens if they don't buy the house? Is there a penalty involved? Or do they just end up paying taxes at the end of the year.
JASON.... . yes, the mighty sword... I like that one. In regards to why I wouldn't see this for those that aren't first time homebuyers... just that I am putting myself in the government's position and then think as they do... lol Need I say more... lol Besides, if they would start with the Seller-funded DPA's, that would be the best thing that they could do... just my .02.
JEFF.... . I would think this would be wise, to do this... even with 4 to 5 months left, if you could save about $1,500, that would be a start. Thanks for the compliment..
LINDA..... . thanks for the compliment. I think first time homebuyers will be rising in numbers. Those that own houses, might not have much equity in them to sell them. And yes, you can reblog this any time. thanks
KEN...... . as mentioned at the end, they will just have to pay it back. It would be the same as if they had no refund with their taxes, yet had money owed. So that money that they saved, they could just give back. And no, there aren't any penalties. thanks
Tru dat.....I'm mr. angle, but you had me beat on this one here. Kudos for the angle that no one else has seemed to have taken.
Jeff, thanks for the info....it will make a huge difference in my current pending purchase.
I really appreciate it.
Bo
Hey Jeff,
Short, concise and to the point! I liked it very very much! I am going to use that angle you suggested. I really hadn't thought about it before, but now that i have, it makes alot of sense.
Great job! I also like the link you threw in there..I already visited it and cut & pasted! It lends credibility to the doubting thomases out there!
Oh, and I agree with the one commentor, that they probably will be doing something like that for all programs soon!
Thanks again!
Darin
LARRY..... . my pleasure and thanks for stopping by. I just wish I had written about this earlier..
BO.... . that's great, I am glad I could help some. Keep me posted. And thanks for the compliment.
DARIN.... . I know, short... most of my stuff is long... lol But thanks for the kind words...
in regards to this possibly being continued over to buyers that aren't first time homebuyers? Not sure if they will. Would it be nice? Sure... but I would like to see something happen with the DPA's first.. thanks
Wow! Great info, Jeff! So, here is a question for you- could an investor, buying as an LLC use that credit, or must the home be owner occupied?? It would be the first home for the LLC.
Oh, and by the way, I will be reblogging this, thank you!!
Jeff....all the mortgage information I need is always at my fingertips. I have you!!!! Thanks. One of my buyers was just asking about the tax credit, and I referred him to my accountant. Now, my accountant has the information from your blog. We are set. THANKS!!!
KEVIN...... I appreciate the polite comment, but I deleted your actual comment because you had a link to a builder in there. I don't believe in those kinds of giveaways... the consumer pays for it one way or another. It's built into the price of all the new homes they build. But I am putting your full comment below, but I blacked out the web site link. thanks and good luck...
There is a chance that those taking advantage of the tax credit will not have to pay it back. I am worried that giving away free money will only put our country in further debt. The real reason that buying is down is the incredibly strict lender requirements, money for improvements is not an incentive to buy as far as I've seen.
Jeff - If you don't mind, I would like to re-blog this too. Is that ok?