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Home Buyer Tax Credit Extension
The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer tax credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. However, the new Worker, Homeownership and Business Assistance Act of 2009 has extended the deadline. Now, taxpayers who have a binding contract to purchase a home before May 1, 2010, are eligible for the credit. Buyers must close on the home before July 1, 2010.
For homes purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.
First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. News release 2009-27 has more information on these options.
Congress also expanded the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010. Be sure to consult your tax advisor for more details.
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The Mortgage Debt Relief Act of 2007 |
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The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17. Be sure to consult your tax advisor for more details. | |
Tax Savings for Historical Properties (The Mills Act)
A historical designation can provide a property tax reduction. San Diego is a relatively young town, but many residents are beginning to take notice of one of our most valuable resources, our historic sites and homes. The Mills Act, named for San Diegan James Mills, a former State Senator, provides an important monetary incentive designed to encourage the preservation, maintenance, and restoration of designated historic properties. Typically, property owners can expect a 20% to 70% savings on their properties' taxes. If you have questions on the calculation of the assessed value of your home, please call the Assessor's office at 858-505-6262 or visit the Assessor's web site.
Tax Savings for California Homeowner’s 55 Years or Older
If you are 55 years or older and are considering purchasing a new home but do not want to lose your low property tax basis, consider whether you qualify for the tax savings provided by Propositions 60 and 90. A homeowner who is at least 55 years old may be able to transfer, one time, the property tax basis of his/her current home ("relinquished home") to a new home if the new home’s value is less than or equal to the value of the relinquished home. Depending on when you purchased your home, this could result in tens of thousands of dollars of annual tax savings. Consult with your tax advisor to ensure you qualify and the timing is right to exercise this one-time benefit, then contact Noël to help plan your next steps in the home buying and selling process.
If your move takes you from one California county to another, check with the local tax assessors to ensure reciprocal agreements have been made to honor the tax-basis transfer. For more information about moving within or to San Diego County contact Noël or, visit the San Diego County Tax Assessor's web site.
1031 Tax Deferred Exchanges
If you are considering selling an investment property but want to defer or avoid paying capital gains taxes, a 1031 Exchange might be a good option. Under section 1031 of the Internal Revenue Code, a real property owner can sell his or her property and then reinvest the proceeds in ownership of like-kind property to defer the capital gains taxes. To qualify as a like-kind exchange, property exchanges must be done in accordance with the rules set forth in the tax code and in the treasury regulations. The 1031 exchange can offer significant tax advantages to real estate buyers. Often overlooked, a 1031 exchange is considered one of the best-kept secrets in the Internal Revenue Code.
To learn more about 1031 exchanges, visit Exchange Resources or contact Noël to discuss alternative properties that meet your investment goals. |
