Sound Mortgage Planning Blog

It is Saturday and I was just going through my past emails and I was reminded of an item of interest that was discussed late last week.

One of the greatest gifts a first-time homebuyer can receive is the gift of funds from a family member to assist with purchasing their new home. Every time I come across a client that is receiving gift funds I feel very happy for them knowing that they have family members that are there to help. As great as this is, both the person gifting the funds and the person receiving the gift must be aware of potential tax exposure.

It's tax season once again and April 15th will be here before you know it. An item that bears reminding is the Gift Tax. Here's why:

According to a local CPA firm here in Lacey, you must file Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return, if:

• Gifts you give to another person (other than your spouse) exceed the annual gift tax exclusion of $13,000 during 2009 or $12,000 during 2008
• The maximum tax is 45 percent

One item that stuck out during our email conversation was the fact that if the person giving the gift fails to file Form 709, the tax payer receiving the gift will then be responsible for the tax on the gift received.

This is not to discourage people from giving or asking for gift funds, but it should serve as a reminder to include this when filing this year.

As always, I am available 7-days a week! Call me if you want to become pre-approved or you just need to ask a question.

Have a great weekend!

Shawn

For more information regarding this topic please see IRS Instructions Page for Form 709.

Shawn Anderson is a mortgage loan officer and does not provide tax-related or legal counseling. Because information provided in this blog entry is in summary form, it should only be relied upon for tax planning decisions after obtaining appropriate accounting, tax and/or legal advice. You are encouraged to submit inquiries to the professional staff at Strader-Hallett & Co., P.S., Certified Public Accountants.

…it’s not all bad news though…

According to the summary of the compromise bill released by lawmakers Thursday, the tax credit will still be available only to first-time homebuyers—those who have not owned a primary residence within the last three years.

Refundable First-time Home Buyer Credit. The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. The full credit is available to those making $75,000 or less ($150,000 for joint filers).

It may be hard to digest all of the news around Senator Isakson’s amendment to the pending economic stimulus package. I’m here to help!

Here are the highlights of the $15,000 Home Buying Tax Credit

· Homeowners that recently purchased their new home may be wondering if they will be able to take advantage of the tax credit that is now before the Senate. The short answer is no. The effective date of the amendment is the date of the enactment. So if they have already completed the purchase of their new home, they will not be qualified for the new program.

· Once the new amendment is enacted, the current $7,500 credit will no longer be given because it will be replaced with the $15,000 tax incentive.

· While the $7,500 first-time home buyer credit was to be paid back, the new $15,000 tax credit does not need to be paid back!

· The tax credit is limited to primary residences and does not come with an income restriction. It applies to any home, meaning a condo, a house, foreclosed, new, or previously owned.

· You CAN take the credit during tax year 2008! Even if you buy a home in 2009, the provision would enable you to file your taxes as if you purchased your home on December 31 of 2008.

· The credit is based on 10% of the purchase price of the home and the credit is spread over two years. So if you bought a home for $300,000, you would qualify for the maximum credit of $15,000. The first year you claim the credit, you receive $7,500, and you would receive the remaining $7.500 the next year.

The President wants a finished product by February 16, 2009! So expect to see this happen quickly!

If you are a First Time Home Buyer or know of someone who is renting, you may want to have them view this 12-minute video presentation regarding the benefits of owning a home.

(2008 NAR Survey Results)

The blog entry you are about to read is from data interpreted from the NAR’s Profiles of Home Buyers & Home Sellers, 2008. While I list some of the stats you are about to read,  I have interpreted the “who, what, where and how”.

A little bit about the survey…it’s based on 10,053 responses and home purchased from June 2007 to June 2008. Since it ended June 2008, I believe that there will be even MORE first-timers entering the real estate market!

• First-Time Home Buyers Made up 41% of All Home Purchases

While it has increased 2% over last year, regionally, the Northeast has increased the most with 46% (or almost ½ of all homes being sold to FTHB); 41% Midwest; 39% South; 41% West. Four out of every 10 buyers fit into this category—FTHB need more homebuying education and the way a lender or real estate agent interacts with them will be different than a homebuyer that has experience buying a home.

• Living Arrangements Prior to Buying Their First Home

75% of FTHB lived in apartment complexes or rented a home or condo prior to purchasing. It’s unchanged from 2007. 19% lived with parents prior to purchasing.

• Marital Status of First-Time Home Buyers

49% Married Couples

12% Unmarried Couples

24% Single Females

12% Single Males

These numbers only vary 1 per cent over 2007 numbers. Notice that single female buyers are double the percentage of single males and half of married couples. FTHB seminars are a way for FTHBs to learn about the home buying process and possibly meet a reliable real estate agent or lender.

• Medium Age of First-Time Home Buyers

54% - Age 24-35

20% - Age 35-44

Think Gen X here! They are independent, blunt and skeptical!

• Average Income of First-Time Home Buyers

Single women earn 13% less income than single males, but they purchase twice as many homes.

• Purchase Price Range

16% - Price Range $75K to $100K

39% - Price Range $100K to $175K

Some areas of country are more affordable than others—however based on this info, over half of FTHB are more likely to purchase a home $175K or below.

• Moving Distance From Current Residence

FTHB move an average distance of 13 miles from their previous residence (apartment or parent’s home).

• Information Sources PRIOR to Buying Home

2007		2008
87%	Internet Search Prior to Purchase	94%
56%	Virtual Tour	63%
49%	Newspaper Ads	45%
44%	Open Houses	48%
30%	Homes Magazines	30%
9%	TV	9%

Without a doubt, the Internet plays the most important role in the first steps that FTHB take when looking for a home.

• The Internet, Virtual Tours and Social Networking

Added to the survey questions in 2008 was the FTHB use of social networking to find homes and real estate agents. 42% of buyers, age 18-24 uses Social Networking sites EVERY DAY versus 19% of buyers, ages 25-44. However, in the 25-44 age group, another 14% (total of 33%) use it several times a week.

• Length of Time to Buy Home

• Financing The Home Purchase