The new and improved home buyer tax credit is official and took effect Nov 9, 2009. The extended and expanded legislation extended the first-time buyer tax credit through May 1, 2010 and includes a tax credit to repeat home buyers.  

Home Buyer Tax Credit Expansion and Extension 

1. The $8,000 tax credit will be extended and available for first-time home buyers through May 1, 2010.
2. A new $6,500 tax credit will be available for repeat buyers who purchase between December 1, 2009, and May 1, 2010. To qualify, buyers must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years.
3. Prospective buyers with binding contracts in place as of April 30, 2010, will be allowed an additional 60 days to complete the transaction.
4. Income limits are expanded to $125,000 on a single return and $225,000 on a joint return.
5. Limitation on the cost of a purchased home is $800,000. 

If you know anyone looking to buy their first Dallas home at a time when prices and interest rates are still down, or if you are thinking of buying another Dallas home and getting the new $6,500 credit please contact me today.

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Something to consider when selling your Dallas home is the Capital Gains ramifications. Will you owe Uncle Sam money after the sale of your Dallas home? Capital Gains are calculated as the difference between what you paid for your property and what you sell it for. Here is how you calculate your Capital Gains. 

Calculating Capital Gains

(+) PURCHASE PRICE – Price paid for property

(+) COST OF PURCHASE – Transfer fees, attorney fees, inspections

(+) COST OF SALE – Repairs, commissions, attorney fees, inspections

(+) COST OF IMPROVEMENT – Room additions, deck, for example, though not replacing existing

(=) ADJUSTED COST BASIS OF YOUR HOME

(-) AMOUNT YOU SELL YOUR HOME

(=) CAPITAL GAIN 

A Special Real Estate Exemption for Capital Gains

Even though the above calculation may indicate you owe Capital Gains, there is a special real estate exemption. Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a Dallas home is exempt from taxation if you meet the following criteria: 

• You have lived in the home as your principal residence for two out of the last five years. 
• You have not sold or exchanged another home during the two years preceding the sale. 

NOTE: As of 2003, you may also qualify for this exemption if you meet what the IRS calls “unforeseen circumstances” such as job loss, divorce, or family medical emergency. 

Learn more about selling your Dallas home by visiting TexasHomeCentral.com.

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Always consult a tax attorney regarding current tax laws.

New tax code changes create benefits for owners of a Dallas home. For years, many people have usually turned away from considering taking on the financial responsibilities of being a homeowner. Renters and prospective home owners are well aware of all the financial stress that comes with owning a home, which makes them hesitant to make the big step and commitment. What might not be known is that homeowners are receiving more tax benefits now than ever before. The Internal Revenue Services, known as the IRS, has made owning a Dallas home a more favorable option in several ways.

Monthly house payments bring the biggest tax benefit to home owners. The interest included in the monthly mortgage payments is tax deductible as long as the loan is for less than a million dollars. IRS guidelines also allow deductions for interest on refinancing and home equity loans. However, they do put limits on how much is actually allowed to be deducted. Borrowing against the equity of your Dallas home is an option renters do not have. Renters also do not have the ability to file federal tax deductions on their monthly rental payments.

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The mortgage interest Dallas homeowners pay is a deduction on their income tax. But there are other tax deductions you can take on your principal residence or second home, such as property taxes, and in some cases, for Private Mortgage Insurance. Read 2008 guideline from Turbo Tax:

You can deduct:

• Your property taxes. And if you bought the home in 2008, you may be able to deduct more than you think. Don’t forget to include real estate taxes you reimbursed the seller for – taxes the seller had already paid for the time you actually owned the place after your purchase. That amount will be shown on the settlement sheet.
  
• Property taxes for taxpayers who don’t itemize. New for tax year 2008, if you do not itemize deductions for 2008, you can increase your standard deduction by up to $500 of real estate taxes paid in 2008 if you file as a single person, or by up to $1,000 of property taxes paid if you file jointly.
  
• The mortgage interest on your primary residence, as well as any secondary residence you own. (There are limits, but relatively few taxpayers are affected.)
  
• The interest on up to $100,000 borrowed on a home-equity loan or home-equity line of credit, regardless of the reason for the loan.
  
• Points that you paid when you purchased the house (or those that you convinced the seller to pay for you).
  
• The premiums paid for Private Mortgage Insurance (PMI) in 2008, but only for policies issued after 2006. (The right to this deduction disappears as Adjusted Gross Income rises from $100,000 to $110,000 on a joint return, and from $50,000 to $55,000 on a single return.)
  
• Home improvements required for medical care.

How much can I save?

The actual amount of money you save on your annual income tax bill depends on a variety of factors:

• Your filing status (single, head of household, married filing jointly, married filing separately)
  
• Your standard deduction amount
  
• Your other itemized deductions

• Your taxable income

Your home-related deductions, plus your other itemized deductions must add up to more than the standard deduction (increased by the amount of property taxes noted earlier that are allowed to non-itemizers), or they won’t save you any money.

What can’t I deduct? 

• You can’t deduct the following payments for your primary residence

• Dues to a homeowners association
  
• Insurance on your home
  
• Appraisal fees for your home
  
• The cost of improvements to your home. (But keep those receipts. They may help you reduce your taxes when you sell your home.)

Thinking about buying a Dallas home? Visit TexasHomeCentral.com or give me a call for more personal service.

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As a follow-up to our recent post, Housing Will Lead Us Out Of Downturn, I wanted to bring your attention to a theory of the National Association of Realtors. The NAR believes if all home buyers were to become eligible for a tax credit without a repayment feature, it could result in an additional 555,000 home sales, enough to meaningfully draw down excess housing inventory. Read what else the associaiton has to say:

An evaluation of options for a home buyer tax credit by NAR shows wide ranging implications and benefits. A full credit to all buyers means an additional 2.22 million households would meet the income requirements for purchasing a home, but only one in four of those households would actually make a purchase.

NAR estimates only 25 percent of newly eligible households would become homeowners, and does not capture the effect of increased trade-up buying activity. As such, these projections may understate the full impact of a home buyer tax credit.

Learn more about the first-time buyer tax credit and how it effects Dallas home buyers at TexasHomeCentral.com.

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Every day, we receive over a dozen requests for a free house value report for homes across Dallas Fort Worth (strangely enough, a large percentage are for house values in Frisco and Keller Texas… does that mean something? huh). The vast majority of the house value requests are for home owners thinking about selling their home. They want to see what their Dallas Home would potentially sell for compared to what they own it for. Did you know that this is only one of many examples of how a free house value report or comparative market analysis (aka CMA) can be used?

Here Are 5 Ways To Use a Dallas House Value Report aka CMA

1. Selling Your Dallas Home- The first and most obvious way to use the free comparative market analysis that you receive from Texas Home Central is to compare your home against other homes that have sold in your neighborhood. I wont go into too much detail here since this one is pretty obvious. What I would like to add here is that an “automated CMA” is not enough to give you a clear picture of what your home will sell for. Sometimes you will get a false sense of value and be too high or too low by thousands of dollars. Price too high and people will not bother looking at your home, too low and people will think something is wrong with your home and try to negotiate you even lower or again, not even visit. It’s imperative that a professional that knows the real estate market take the time to do a deeper analysis, comparing more that just bedrooms, bathrooms and square footage. A good agent will also compare lot size and location, upgrades, home features as well as what other homes have that your home may not have. (more…)

There are very few “good things” I can say about the U.S. tax code… in fact, I think it’s long over due for change, but one thing I can say is that there are some benefits to which makes buying a home in Dallas Fort Worth a great idea for almost everyone.

Mortgage interest deductions, including in some cases mortgage insurance premiums, reduce home owners’ tax liability by reducing income. The deduction includes interest paid on both a first and a second home.

Interest on home equity loans is also deductible — whether the borrower uses the money to remodel the kitchen or to take a vacation to Disney World.

Profits from selling a house are potentially a huge windfall. When a home owner sells a primary residence, any profit on the sale of the property is tax free up to $250,000 for single home owners and $500,000 for married home owners filing. Any profit above that is nearly always a long-term capital gain taxed at 15 percent — less if the seller’s tax rate is less than 20 percent.

Home owners can itemize. That opens up opportunities to deduct a host of other items that wouldn’t be deductible if the taxpayer took the standard deduction. Source: The Boston Globe, Leonard Wiener

If you are interested in knowing more about how taxes will affect your home purchase in the Dallas Metroplex, please call us at 800-326-9011 or contact us via email by clicking here!

A recent article on CNNMoney.com titled “7 Ways to Fight Property Taxes” had a checklist for fighting your tax value when it seems too high. From experience, I can tell you that Denton County, where I live, has been notorious for raising your property value every year for the maximum amount possible. Then, they leave it up to the homeowner to fight the value. If they didn’t, it is more money in the taxing authority’s pocket.

The “7 Ways to Fight Property Taxes” were:

1. Learn your system (find out what method the taxing authority uses to arrive at your value).
2. Get your assessors evidence (find out what information they have about your house).
3. Make sure the description is right (compare the information they have about your house to the true facts about your house).
4. Build your case (most taxing authorities will give you a specified time period to appeal. Use this time to find comparables with your homes characteristics and also find out what the appraisal district is valuing your neighbors homes at).
5. Meet the assessor informally ( this is the best time for you to explain your case and also have the assessor explain his).
6. File the appeal (make sure you are prepared to explain your case to the full appraisal board. Prepare a speech and practice it).
7. You lost (If you did lose your case and want to take it further, you will most likely need an attorney and an appraiser. At this point it will be up to you to decide if saving a little money in tax dollars is worth spending it in attorney’s fees).

This article does a good job of outlining all of your options. However, I can also tell you from experience that the two most important pieces are building your case and meeting with your assessor informally. When I felt my house was overvalued on the Denton County tax rolls, I called the county and set up an informal meeting. Armed with a recent HUD-1 from the purchase of my home, I was able to get my value reduced to an acceptable level at the informal meeting. I was in and out in 10 minutes with an appointment… trust me, taxing authorities would prefer to negotiate this way as it reduces the backlog of a full board hearing. I hope these tips will help you the next time you need to fight your property taxes!

Craig Pollard is a mortgage professional and owner of Texas Mortgage Team. He specializes in the Dallas Fort Worth area and is a frequent voice on Texas Home Central’s blog. Craig can be reached at 972-317-9900 or emailed by clicking here.