• You must be a first time home buyer
• You must purchase by April 30, 2010
• The home must become your primary residence
• Income must be less than $75000 for individuals and less than $150000 for married couples

CNN also provides additional details here on the tax credit.

If you have any questions, please don’t hesitate to comment below.

This Stability Plan is part of the President’s comprehensive strategy to get the economy back on track. The plan will help many home owners restructure their home mortgages and avoid foreclosure or help save money on their mortgage. Every MORTGAGEE should try and see if this act helps them reduce payment. Every reduction in payment will help the economy.

As a second piece of the Home price stablization plan, government is offering $8000 tax credit for the first time home buyers. First time home buyer is defined as one who has not owned a home for last three years. This is HUGE, imagine your price from the purchase cut down $8,000; in other words, it is like uncle sam is paying $8,000 towards your new house. One should not lose this golden opportunity, once in a life time opportunity.

This is differnt than one from 2008, in 2008 tax credit of $7,500 was offered, but that was to be paid back to the government over five year. This $8,000 creadit for year 2009 does not have to be re-paid to the government. This a true $8K credit to your tax bill, and not to be re-paid to the givernment. Your openion is importatnt please share with the other readers. Good luck with the credit, go out and buy a HOME!

]]> http://www.freetaxadvisor.com/president-obamas-homeowner-affordability-and-stability-plan/feed/ http://www.freetaxadvisor.com/american-recovery-and-reinvestment-act-of-2009/ http://www.freetaxadvisor.com/american-recovery-and-reinvestment-act-of-2009/#comments Sat, 14 Feb 2009 20:02:37 +0000 freetaxadvisor http://www.freetaxadvisor.com/?p=82 Past week Congress had passed $827B stimulus package and then Senate followed suite with the modified bipartisan bill of $787B. On Feb 13th 2009 Congress made further changes and modifications and passed $787B bill with the majority voting 246-183. Now it will go back to Senate for a final approval and it is hoped to pass Senate next week. Once passed, it will go to President’s desk for signature and will become a law - American Recovery and Reinvestment Act of 2009.

There are too many confusing and conflicting information available on the internet, since bill has not signed by President, lot of that information may or may not get singed in to a law.

Once President signs it and details are available we will review the entire bill and post a summary report for our readers to review and reap the rewards. There are lots of tax credits for homes owners and incentives for individuals and businesses, be sure to return for the detail report.

Government Tax Credit For First Time Home Buyers:

So far what it looks like is that government is proposing to give tax payer a $15,000 tax credit on a home purchase. Here is one of the proposal or a bill still in work.

“Senator John Ensign, Chairman of the Republican Policy Committee, drafted an economic recovery plan that will help fix the housing market, create jobs and provide tax relief to middle-class families and small business owners. The bill, titled the Fix Housing First Act, is scheduled for a vote today”.

“The underlying problem with our economy is the deteriorating housing market,” said Ensign. “In Nevada, just a few short years ago housing prices were through the roof. Now, we’re leading the nation in foreclosures. We need to address the root problem, and my bill does that by helping homeowners stay in their homes.”

Ensign’s plan costs half as much as the trillion dollar stimulus bill currently being considered. The Fix Housing First Act also includes a $15,000 homebuyer tax credit, tax cuts for the lowest tax brackets and tax relief for small businesses so they can help boost our economy. The lowest tax brackets would be lowered from 15% to 10% and from 10% to 5%.

This is a very good news for the US home buyer in 2009 if this bill passes and becomes a law. $15,000 credit for your IRS tax will give huge jolt to the housing market in a positive way. If this is really a tax break then basically government is paying portion of the home price for you to buy a house. Also Current mortgage rates are much more consumer favorable than ever before.

There will be some stipulation however, like consumers will have to live in the house for at least two years and should be considered their primary residence. This tax credit was approved by house and senate in hope to boost the real estate and the economy but it only helps in less expensive regions. This bill is still not signed by president today Feb. 9^th 2009. As people say in the Accounting world that you should think about taxes early in the year and not in December, this is the time to think about you tax bill for 2009. However observers are more skeptical about success of this bill as issues are more severe in the regions with high real-estate prices. States like California and New York will not get help because home prices are too high in those areas and $15,000 isn’t that big of an amount to support very high home prices in those markets. So this tax credit might be beneficial in areas that are less expensive.

If this bill is signed by President then this will create one of the best home buying opportunity in a century if not more. Home price is down, mortgage rate is down and a tax credit to help you a buy a home. Wow that is best of all World, one should not miss this opportunity. Time will pass, bad time will be over and you will have nothing but regrets that you did not take the opportunity that was presented to you. Current thirty year mortgage rate is at historic low, 5.0% and may go down further.

There are many changes in the 2008 tax filing, here are some important one discussed. You must refer to IRS publication if you need more detail. Hopefully this will serve as a guideline for you to pick one that applies to you.

· First-time homebuyer credit. You may be eligible to claim a credit of up to $7,500 if you bought your home in 2008 and are a first-time homebuyer. However your modified adjusted gross income must be less than $95,000 ($170,000 if married filing jointly). You must understand that this credit is like a loan to you and not a free credit from government. You must recapture / repay the amount of your 2008 credit in 15 equal yearly installments beginning in 2010. For more detail you should see first time homebuyer credit guide from IRS.

· You can obtain IRS forms (Tax Forms) and IRS publications by going to this web site http://www.irs.gov/formspubs/index.html. This government web site has lot of information for you to save on federal taxes.

· Standard Mileage Rate: For 2008, cost of operating your car for business use is 50.5 cents per mile and 58.5 cents per mile after June 30^th , 2008.

· Alternate Minimum Tax: Alternate Minimum Tax, also called AMT amount has been increased to $46,200 for single and $69,950 for married filing jointly.

· IRA Deduction: Individual Retirement Account deduction amount has been raised to $5000. However for individual who’s age is 50 or older then that amount can be $6000.

· Child Investment Income: If your child’s age is under eighteen and child’s earned investment income is $1800 or more you must file Form 8615.

· Tax Relief for certain Disaster Areas: enacted as a result of the May 4, 2007, storms and tornadoes affecting the Kansas area disaster. Refer to Publication 4492-A, Information for Taxpayers Affected by the May 4, 2007, Kansas Storms and Tornadoes, for more details.

· Tax relief for Midwestern disaster areas. Temporary tax relief was enacted as a result of the severe storms, tornadoes, and flooding affecting the Midwestern disaster areas. Refer to Publication 4492-B for more information for affected Taxpayers in the Midwestern Disaster Areas.

· Standard Deduction: Amount for a standard deduction for the people who do not itemized on Schedule A has increased and it depends on your filing status and income level, refer to IRS 1040 publication for specific application for your need.

· HOPE or lifetime learning credit: HOPE or lifetime learning credit income limit has been increased for 2008 tax filing year.

o In 2008, the amount of your Hope or lifetime learning credit is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $48,000 and $58,000 ($96,000 and $116,000 if you file a joint return).

o Maximum amount of HOPE credit is increased. Beginning in 2008 the max amount of the hope credit is increased to 1,800. This is an increase from the 2007 max amount of $1,650. The amount of hope credit per eligible student is the sum of 100% of the first $1200 of the qualified education expense you paid for the eligible student and 50% of the next $1,200 of the qualified education expense you paid for that student. So if you paid $5,000 for the first student, your max credit would be $1,800. If you paid $1,400 then you can deduct $1,200+100 = $1,300

· FREE 2008 Tax Filing

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The EIC is a tax credit. Tax credits help to reduce the amount of taxes you owe or increase the amount of your refund.

To qualify, Parts A, B, and D must apply to you if you have children or parts A, C, D must apply to you if you don’t have children. To learn about more about part A, B, C, and D, please view IRS publication 17, Chapter 36. You can also view it by clicking here.

If you would like to file your federal income tax return online for free, you can use H&R TaxCut Free Edition by clicking here. If you need any help manage your finances online for free, try Quicken Online for free by clicking here.

If you have any questions or comments, please don’t hesitate to comment below.

· You can obtain IRS forms (Tax Forms) and irs publications by going to this web site http://www.irs.gov/formspubs/index.html. This government web site has lot of information for you to save on federal taxes.

· Tax return can be filed by hand written paper copy or can be done on line. Free tax service is available at this link. Free Tax Filing.

· IRS tax rate table is listed in the appropriate publication filing instruction guide on the www.irs.gov web site.

· You can down load any and all IRS publications and form by going to IRS web site

· If you like to have a hard copy of the forms then go to following link and request the appropriate documents delivered to you free of charge. Click here http://www.irs.gov/formspubs/page/0,,id=10768,00.html

ROTH IRA: This individual retirement account is funded with after taxed money so there is no immediate tax savings. However money that grows in this account is tax free, meaning you will never owe any taxes when you take money out of this account at the retirement. If you are in a low income bracket this is a fantastic way to save and grow your retirement.

Defined Contribution Plan: A type of retirement plan that specifies the contributions made to the plan, either as a flat dollar amount or as a percent of compensation.

Qualified Retirement Plan: An employee funded retirement plan that you may contribute to on a pre-tax basis which provides tax-deferred earnings. Tax deferred means you do not pay taxes on the earnings until you withdraw money from this account and money grows tax free.

Tax Deferred Investment: Investment where earning grows tax free. Meaning that taxes are deferred or delayed normally until you receive a distribution. Contributions to 401(k) plan or traditional IRA plan are examples of tax-deferred investments

Vesting: Company sponsored retirement plan normally has two portions, your contribution and company contribution. Your contribution is yours and it is100% vested (part of your retirement fund) upon contribution. Company contribution generally has vesting period, means even it shows up in your retirement account it is not yours until certain conditions are met. Generally these conditions are tide to length of time of your employment with current employer.

Rollover: A retirement plan fund moved from one trustee (Account) to another because of changes in employment status.

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Most people will answer “in the beginning of the year and around April”. That is a wrong answer. One should think about taxes all the time. Last minute awakening will not help you gain benefit of all the deductions that you are entitled to.

Tips that you should remember

You must prepare a list of items that you can save taxes on or take a deductions for. Throughout the year when ever you run any type of expenses, you must ask yourself a question if that expense can be deducted from your income. By keeping your list handy you will be able to file your receipts properly and at the end of the year income tax filing time it will come handy. If you wante to submit your federal income taxes for FREE please visit H&R block by clicking here.

Update your savings contribution rate

Beginning of the year is a good time to access your overall expected earnings and your expenses so you can set your contribution rate. Adding a small percentage of your earnings now will give you a tremendous head start on your overall retirement savings. Once you access the upcoming New Year’s earning power, adjust your savings rate in your employer’s savings plan web site or contact your HR department to make the appropriate changes.

Re-balance your investment

This is a good time to look at the performance of your investment for past one year and rebalance your portfolio. Means that you must first decided what % of fund you want invested in stock, bond and fix income investment. If you are keeping the same percentage as last year you still need to re-balance the portfolio so that % are maintained. With the $700B government bailout to the US economy, it is possible that stock market could recover in 2009 and big gains may be ahead!

Update beneficiary section of the savings plan

This is one of the things where lot of people do not have a clue what they have put down or left it blank. Make sure that this section is filled out and it is correct. By providing beneficiary designations you are guaranteed that the benefits payable after your death will go to the person you have chosen.

Maximize your allowable contributions

IRS sets up maximum limits on the allowable contribution for your retirement every year. Maximum retirement contribution limit for 401k plans increases each January based on the cost-of-living changes during the prior year. IRS announces the new limit normally in mid-October. One can contribute maximum up to $16,500 for 2009, and additional catch up contribution is allowed for people age 50 or older.