Buying a House in 2009 Could Mean You Pay No Income Taxes This Year

The stimulus bill has not passed Congress yet, but there is a lot of excitement in the housing industry about the $15,000 tax credit contained in the bill. The President is eager to get the bill passed through Congress and signed into law. Regardless of the wisdom of the bill (and I know there are pros and cons), homeowners are bound to reap some huge benefits.  In fact the benefits could be so huge that you end up not paying any income taxes in 2009.

From my research it is apparent that this tax credit is designed to encourage high income people purchase homes. The tax credit applies to all income groups. The bill allows homeowners to split the $15,000 into two separate tax credits of $7,500 to be taken in successive years. What is interesting is that if you purchase a home then there is a chance you won’t pay taxes at all this year. I’m not a tax accountant but, according to the IRS to pay $7,500 in federal taxes, a family of four would have to earn about $92,125. If you’re below this income level and purchase in the right range you pay no taxes! And what I mean by the right rang is that the credit you receive is the less of  $15,000 or 10% of the value of the home purchased.

Pretty cool incentive to purchase a house this year. So, what are you waiting for?

Oh, I guess for the bill to pass and get singed! 🙂

Foreclosure Reduction Plan Clears Hurdle

Apparently Citigroup has dropped its opposition to amending bankruptcy law in an effort to reduce foreclosure rates. Now that the Feds control a portion of Citigroup that was to be expected. Here is the story from WSJ today:

WASHINGTON — A Senate bill aimed at giving strapped homeowners more leverage in renegotiating their mortgages cleared a hurdle Thursday when Citigroup Inc. dropped its opposition.

The legislation, which is being advanced by top Senate Democrats, would let judges set new repayment terms for mortgage holders in bankruptcy court. Lawmakers say the measure is aimed at jump-starting broader efforts to renegotiate millions of underwater mortgages now weighing down the housing market.

Until recently, Citigroup had fiercely opposed proposals to give bankruptcy judges latitude to change the terms of mortgages. Its about-face comes after the federal government has pumped $45 billion into the company since last fall. The government is now keeping the company on a tight leash.

In letters Thursday to congressional leaders, Citigroup Chief Executive Vikram Pandit praised the legislation as a way to help borrowers stay in their homes. “Given today’s exceptional economic environment, we support its swift passage,” he wrote.

The Mortgage Bankers Association remains opposed to the bill. The main reasons for the opposition is as follows:

But the banks argue that any help the proposal might provide to troubled homeowners in the short run would be offset by the higher costs that borrowers would have to pay to get mortgages in the future. The reason, banks say, is that they would pass along the added risk to borrowers in the form of higher interest rates, larger down payments or increased closing costs.

We’ll see how this develops.

Details of the $300,000,000,000.00 Mortgage Overhaul

Okay most everyone knows what I think about this massive bailout package Congress is about to pass. In case you missed it, I think it’s a sham. Seriously. A big sham. How else do you explain this to the 30% of tax payers who are not homeowners. How about the 80%+ homeowners who pay their bills on time, buy what they can afford and read before they sign? Yeah. How about these tax payers.  Mr. and Mrs. Renter who lives within your means how about you pony up some dough so that we can clean up the mess our Wall Street pals and a few over excited folks made over there.


Take a deep breath.


Now. Here are some of the details of the $300,000,000,000.00 mortgage rescue plan currently being “debated” in the Senate. From the Dallas Morning News:

They would receive a refundable tax credit of up to $8,000, or 10 percent of the home value, on purchases of unoccupied housing.

As part of a regulatory overhaul of Fannie Mae and Freddie Mac, the mortgage finance giants, the bill would permanently increase to $625,000, from $417,000, the limit on loans they can purchase from lenders in expensive housing markets. That would make it easier for borrowers in those areas to obtain mortgages at discounted rates.

Later on in the same peice it says:

The Senate bill would provide $150 million to expand counseling for borrowers to prevent foreclosure and establish stricter lender disclosure rules to make plain the maximum monthly payment for an adjustable rate loan.

The bill also establishes an Affordable Housing Trust Fund, to be financed by $500 million to $900 million in fees from Fannie Mae and Freddie Mac. Initially, the trust fund would cover any expenses related to the foreclosure rescue plan, meeting a demand by Senate Republicans that taxpayers not pay for the program.

Under the refinancing plan, only borrowers seeking to remain in their primary home would be eligible, shutting out real estate speculators and owners of vacation homes. And lenders would first have to agree to cut the principal balance of loans to roughly 85 percent of each property’s current value, a substantial loss in many housing markets.

Arizona Mortgage Team has a great post with all the details too.

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