Homebuyer Tax Credit Extended! Signed Into Law November 6, 2009

President Obama has signed legislation to extend the Homebuyer Tax Credit. Passage of the bill was widely anticipated to further spur economic recovery in the housing sector, as more buyers are now eligible for tax breaks under the new law. The $8,000 first-time homebuyer tax credit was originally set to expire on November 30.

In addition to offering the $8,000 first-time homebuyer tax credit, the new law also allows a $6,500 credit for repeat or move-up homebuyers who have lived in their primary residence for five years or more.

The tax credits are available to buyers who sign purchase agreements on a new or existing primary residence between December 1, 2009, and April 30, 2010. Buyers would have until June 30 to close on their new homes.

Open Space Assessment Refund

The Santa Clara County Open Space Authority parcel tax which began July 1, 2002 and ended June 30, 2008 has been ruled unconstitutional and refundable.

For most Santa Clara taxpayers it was almost $20 annually, totaling approximately $120 in the six years.

To request the refund, complete the one-page claim form you received in the mail or claim on-line at Refund Claim for Tax Refund.

This claim must be filed by September 23, 2009.

If you do not request the refund, the Open Space Authority will keep your money to use as was originally intended.

Notification of Assessed Value

The County Assessor recently sent you a postcard with the January l, 2009 assessed value of your home. This value will be used to calculate your property tax due in December, 2009 and April, 2010.

Please look carefully at this assessed value and ask yourself if you could have sold your home last January for this amount. Because of the provisions of Proposition 13, most people will think they could have sold their home for more than the current assessed value. If you are among this majority, you need to take no further action.

If you think you would have had to accept less than the assessed value to sell your home last January, you should request an Assessor’s valuation review by August 15. You may request a review online at www.sccassessor.org/prop8.

You must have support for your valuation adjustment request. The usual support is a list of the sales prices of comparable properties during the three months before and after January l. An appraisal by a realtor familiar with your area can also be helpful. Carla Griffin does these appraisals for residents in The Villages.

Please remember that fair market value is always a range and there is no single correct valuation. Also, remember that the tax rate is a little over one percent (1%) of the valuation. Consequently, a $10,000 change in assessment will only reduce your taxes by a little over $100 for the year.

Would you like a property valuation? If you live in The Villages and would like an appraisal, please call 408.274.8766 before August 1 for your FREE property valuation.

Use a Reverse Mortgage to Purchase a Home

Did you know you can use a reverse mortgage to purchase a home? The American Recovery and Reinvestment Act of 2009 (The Stimulus Package) includes a feature for seniors age 62 and over: the availability of reverse mortgages on home purchase transactions.

An example is Meghan who recently sold her home for $600,000, netting approximately $515,000. She had originally wanted to purchase a place for $450,000, which would leave her a cash reserve of $65,000. However, what she really liked cost $550,000. She is purchasing the property for $550,000 with $300,000 cash and a $250,000 reverse mortgage. She is very excited because this will leave her with $215,000 in cash reserves. Yet, because it is a reverse mortgage she will not have to make any payments until her home is sold or she no longer uses it as her primary residence.

As an extra bonus for Meghan, because her purchase price of $550,000 is less than her sales price of $600,000, she will be able to transfer her property taxes to her new home. She had lived in her home for over 30 years so her property taxes are quite low.

If you know of anyone who might be in this situation, please suggest that they consult their tax advisor and talk to a Senior Equity Reverse Mortgage specialist.

Published by:
Carla Griffin, Broker, B & A Realtors

Tax Information for Second Homes (Section 121)

The Section 121 tax incentives modification under HERA affects the $250,000 / $500,000 exclusion of gain on the sale of a principal residence. It is the only real modification to the existing traditional Section 121 and Section 163 real estate tax codes.

Beginning 1/1/2009, a second home (or rental property) that is converted to a principal residence will have to play by some new rules.

When the second home is sold, any gain attributable to use as a second home (or rental property) will be taxed at capital gains rates at that time. Any gain attributable to use as a principal residence will remain excludable, up to the $250,000 and $500,000 limits. Essentially you must now prorate the usage, whereas before you could potentially live there for 2 years and get the full exclusion... now you'd have to look back over the 5 year period and prorate the time spent as second home or investment and treat that based on capital gains, and the balance would apply toward the $250,000/$500,000 Exclusion.

If you own a second home (or rental property), PLEASE work with your tax advisor before selling and calculate your capital gains.