Q&A on economic stimulus law
Lots of questions about the new economic stimulus law. I posed some to tax professionals. Here are your questions, and their answers.
Q. Regarding the first-time homebuyer credit: If a couple is married and one spouse does qualify for a first time home buyer credit, but the other spouse does not qualify for the credit because he already bought and sold a house year’s ago, is there any credit available to the couple? For example, the husband bought and sold a condo a few years ago before he was married. Only his name was on the condo. His wife has never bought a house before. If the couple is buying the house together, is their any tax credit available to them?
A. Both spouses must meet the qualifications for either to get any tax benefit associated with this credit, says Mark Steber, Vice President of Tax Resources for Jackson Hewitt Tax Service. A "first-time homebuyer" is any individual (and spouse if married) who had no present ownership interest in a qualifying principal residence during the 3-year period ending on the date of purchase of the principal residence for which a first-time homebuyer credit is being claimed.
Q. The Making Work Pay credit is worth up to $800 per married joint filers. What if one spouse is unemployed? Does the couple still get $800? A. Eligible Individuals may receive a credit of 6.2% up to $400 ($800 if married filing jointly) of their earned income for tax years 2009 and 2010.
Individuals must have earned income from wages or self-employment, Steber says. Combat pay is considered earned income for purposes of calculating this credit.
Q. Will you have to file a tax return to get the $250 credit for Social Security beneficiaries?
A. Consumers do not have to file a tax return to get the credit, Steber says. This payment will come from the Treasury Department who will get the information from the Social Security Administration, the Railroad Retirement Board, and the Veteran’s Administration. Eligible individuals only need to have received a payment of any type of Social Security or Railroad Retirement benefit, Supplemental Security benefit, or Veteran’s Disability compensation or Veteran’s Pension benefit during the three month period directly preceding the signing of the bill.
Q. COBRA provisions: The government will subsidize 65 percent of the premiums for workers through a tax credit to employers. Is this provision voluntary for employers, or must they offer this to ex-workers?
A. They must offer it to all employees and ex-employees that qualify, Steber says.
Q. Do you have to buy an American-made car to get the sales tax deduction for new car purchases?
A. There’s no stipulation that the vehicle has to be American made, say the tax experts from CCH, an Illinois provider of tax information. Our Law and Explanation book states: “A qualified motor vehicle is a passenger vehicle, light truck, or motorcycle that has a gross vehicle weight rating of 8,500 pounds or less, or a motor home of any gross vehicle weight.”
Q. I had read somewhere something in the package about some sort of tax credit for existing home owners allowing us to take advantage like a first time home buyer. Is this true and if so, do you know what the tax credit would be and when we’d be able to use the credit, this year or next?
A. What the reader probably has in mind is not a credit, but an additional deduction taken after the standard deduction on your tax return, according to CCH tax experts. It allows non-itemizers to deduct up to $500, or $1,000 on a joint return, for state and local real estate taxes you paid in 2008. The deduction will also be available for the 2009 tax year.
Comments
I purchased my first home in August 2008 for $93,000.00. My AGI is below $60,000.00. At the time of purchase I was aware of a foundation issue that would need to be repaired. I plan on using the first time home buyer credit of $7,500.00 to fix the foundation because it was purchased between April 2008 and July 2009. This credit must be repaid over 15 years.
The economic stimulus bill that was just passed raises the credit to $8,000.00 and removes the repayment requirement. However, this new credit is not retroactive before January 2009. It is extremely unfair that I will be forced to repay the $8,000.00 credit while someone who bought a home 6 months after I did, can claim the increased credit without repayment.
Because this is now signed into law, I see no other route to voice this extreme inequality than the official IRS Taxpayer advocate office. If anyone else is caught in this six month window and knows of any contacts or groups that can be joined to fight this inequality please e-mail me at warren_paine@yahoo.com with details.
Thanks,
WAP
Posted by: WAP | February 19, 2009 10:39 AM
Regarding the homebuyer credit: My wife and I are building a home that we started in 2008. It will be completed and ready for our occupancy in May 2009 at which point we will get permanent financing. Is this considered a purchase that qualifies for the credit?
I forwarded this to a tax pro, and am waiting for a response. I'll post the answer with others when it comes in. ema
Posted by: ole | February 20, 2009 11:43 PM
I'm one of the "lucky" ones who qualify for the credit, but here's my take, I feel all of us are the unlucky ones as we (my younger generation) Will have to pay for the mistakes of this older generation. Giving away money you do not have is NEVER a strategy for success, and that's exactly what the USA is doing with these stimilus and bailout packages. WAP, GROW UP! You made a choice you didn't wait and you're crying about it later. So if you were to buy a new car in 2008 and then in 2009 the 2008 model year is discounted to get the last units sold, do you cry about "inequality" then? I'm 23 I've been saving for 7 years to buy a house, and here I am, with or W/O the government's help. That's how it should be. If you couldn't have afforded the foundation W/O the government's loan you probably shouldn't have bought the house in the first place.
Posted by: JED | February 21, 2009 10:11 AM
To Warren_paine,
Just be lucky you are getting the 7500
credit(loan with $ 000 interest!) to repay in 15y. What's in it for folks like me who bought 5y ago and PAYING their mortgage and getting NOTHING !
Don't gripe, take the $ and pay it back $500 at a time ! I only get a meager $800 between my wife & I and all the "on time" mortgage payments I can make.
Posted by: Kevin Watts | February 21, 2009 12:25 PM
I work part-time, my husband works full-time. How much more should we expect to see in our paychecks?
How about my sister who is not married and works part-time?
Check the blog's Q&A on the Making Work Pay credt in the economic stimulus. The Making Work Credit applies to the first 6.2 percent of earned income up to $400. You'll need to do the math since you don't say how much you earn. - eileen
Posted by: Abbey | February 21, 2009 4:18 PM
I own several older rental properties. I would like to replace the furnaces and air conditioning units, windows, roofs, and perhaps hot water heaters. Can I get a deduction of each expenditure for rental properties? what are the guidelines for "energy efficiency"?
I forwarded your message to a tax professional and am writing a response. Check the blog later. I'll post the answer with others when it comes in. - ema
Posted by: Angie | February 22, 2009 3:08 PM
I am looking to buy a house and get a loan under my name (primary) and my mom's name (secondary). My mom will not be living in the house. If I am a first time home buyer but my mom isn't, am I still eligible for the tax credit?
Is your mom's name going to be on the deed of the house as a co-owner?
Posted by: Jennifer | February 23, 2009 6:54 PM
My mom's name will only be on the loan.
Posted by: Jennifer | February 24, 2009 9:46 AM
My mom is co-signing only be on the loan. Not Co-owning the house
A few readers have asked about getting the credit if they have someone co-sign on the loan. I'll forward that question to a tax pro. Keep reading the blog and I'll post the answer when it comes in. - ema
Posted by: Jennifer | February 24, 2009 9:47 AM