Tax Credits: How you stand to save even more on a foreclosure

Tax Credits How you stand to save even more on a foreclosure

Tax Credits
Tax credits are provided by the federal government to reduce the amount of money you pay on your income taxes. This can be worth anywhere from 10 to 50 percent of your adjusted gross income depending on how much you make.
You may also qualify for a tax credit if you meet other certain criteria.

Tax Credits
You may be eligible to receive a tax credit if:
You are a low-income American citizen.
You don't owe any taxes.
You deducted more than it was necessary for you to deduct on your tax liabilities.
You are a homebuyer and a member of the military or a federal employee who served official qualified extended duty service outside of the United States

Tax Credits
Low-income Americans stand to receive more in tax credits than middle- or upper-income citizens. Low-income Americans are generally expected to pay less in taxes.
You may also receive a tax credit from the IRS if you don't owe any outstanding taxes. You may have spent more in taxes taken from your income than you owe to the government.

Investment Tax Credit
This is a voluntary tax credit common to individuals and companies.
Investment tax credits are an incentive to deduct more on tax liability than the minimum depreciation allowances. This allows the individual and/or company to receive a credit back on the amount that they paid over their allowance.

Housing Tax Credits
The type of tax credit most relevant to foreclosed home buyers are housing tax credits, which can be claimed on your tax return through the appropriate IRS form.
This is especially relevant to first-time homebuyers. A first-time homebuyer is legally defined as someone who has not previously owned a home for at least three years.

Foreclosure Crisis
In 2008, the housing bubble burst.
This foreclosure crisis was caused by the effect of several shaky subprime mortgages going into default. These defaults were the result of mortgage payments being raised beyond what many homeowners could afford to pay.
The defaults exceeded what the Federal Reserve Bank deemed acceptable.

Foreclosure Crisis
Because these defaults were so well beyond an acceptable level of foreclosures as deemed by the Federal Reserve, the U.S. Congress passed the Foreclosure Prevention Act of 2008.
This act was passed as a measure to prevent the foreclosure rate from hitting record highs again.

Foreclosure Prevention Act of 2008
Also referred to as the Housing and Protection Act of 2008, the Act had many benefits. Among these benefits:
Funding for Fannie Mae and Freddie Mac was increased.
New regulations were included for the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD).

The Foreclosure Prevention Act also provided a tax credit worth up to $7,500 for first-time homebuyers.
Homebuyers over the age of 18 who purchased their home between April 8, 2008 and July 1, 2009 and earned less than $75,000 individually were eligible.
For joint returns, homebuyers who earned over $150,000 were eligible.

Among the benefits that homebuyers who qualified for the Foreclosure Prevention Act of 2008 could receive:
They became eligible for a $7,500 tax credit .
They could receive a virtually interest-free government loan.
They had the potential to appreciate the value of their home.
They could receive additional funds for repairing and redeveloping a foreclosure.

The first-time homebuyers who received the $7,500 tax credit under the Foreclosure Prevention Act of 2008 will have to repay this tax credit over the time span of 15 years.
They must pay back the tax credit at equal installments of 6.67% p.a. via a surcharge on their annual income taxes.

American Recovery and Reinvestment Act of 2009
Among the modifications that the American Recovery and Reinvestment Act of 2009 made to the housing market:
A new homebuyer tax credit for first-time homebuyers was created.
A tax credit was added for repeat homebuyers.
First-time and repeat homebuyers were eligible, provided they were over the age of 18 and bought a home worth less than $800,000.

Unlike the first-time homebuyer credit in the Foreclosure Prevention Act of 2008, the credit received in the American Recovery and Reinvestment Act of 2009 does not have to be repaid.
As long as the home remains the homeowner’s primary residence for at least three consecutive years, the homeowner is under no obligation to pay it back.

The $8,000 tax credit was originally available only to first-time homebuyers who had purchased their first home between the dates of January 1, 2009 and December 1, 2009.
Later, this deadline as stated in the American Recovery and Reinstatement Act of 2009 was extended from December 1, 2009 to April 30, 2010.

Repeat homebuyers who purchased a home between November 6, 2009 and April 30, 2010 became eligible for a $6,500 tax credit.
To be eligible for the credit, repeat homebuyers had to have lived in their previous primary residence for five consecutive years. This is out of the eight years prior to purchasing their new primary residence.

First-time homebuyers earning less than $75,000 or $150,000 for joint returns (after an additional $20,000 was phased out) were eligible from January 1, 2009 to November 30, 2009.
From November 7, 2009 to April 30, 2010, first-time and repeat homebuyers earning less than $125,000 or $225,000 for joint returns (after phasing out an additional $20,000) were eligible.

Though these credits have expired for most Americans, members of the military may still qualify for either tax credit . This includes certain federal employees serving qualified official extended duty service outside of the United States.
Qualifying servicemen must purchase their home by April 30, 2011 and close by June 30, 2011.

You may still qualify for a tax credit if you are a member of the uniformed services, member of the Foreign Service, employee of the intelligence community or the spouse of a serviceman.
You must have served on qualified official extended duty outside the United States between December 31, 2008 and May 1, 2010.

Qualified official extended duty is defined as a period of ordered service in excess of 90 days. This period must have been served at a minimum of 50 miles from the serviceman’s principal residence as stated on their taxes.
Members of the military who were ordered to serve in government quarters may also qualify for the tax credit .

To Review...
You may receive a tax credit if you’re a low-income American, don't owe taxes or deducted more than necessary. You may also receive an $8,000 or $6,500 tax credit if you’re a homebuyer who served official extended duty between December 31, 2008 and May 1, 2010.
The Foreclosure Prevention Act of 2008 was passed to prevent another foreclosure crisis .

To Review...
First-time homebuyers who bought a home between April 8, 2008 and July 1, 2009 were eligible for a $7,500 tax credit .
First-time homebuyers who bought a home between January 1, 2009 to April 30, 2010 were eligible for an $8,000 tax credit.
Repeat homebuyers who bought a home between November 6, 2009 and April 30, 2010 were eligible for a $6,500 tax credit.

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Tax Credits: How you stand to save even more on a foreclosure

by Foreclosure Deals on Mar 29, 2011

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