Clearing up confusion regarding tax credits

Tax credit resources

To read more about the tax credit and find other materials, visit floridarealtors.org here.

TAMPA, Fla. – Jan. 26, 2010 – Federal tax credits for homebuyers have certainly boosted the Tampa Bay area real estate market.

The incentives have prompted nervous buyers to get off the fence, and that has helped the area shed thousands of homes from the region’s inventory of unsold properties.

But as these buyers prepare to cash in on their purchases by filing their tax returns, many are finding they may not qualify after all or don’t know how to file.

“There’s a lot of confusion,” said Greg Armstrong, a Coldwell Banker broker in Pasco County. “It’s so complex that if you’re not living it every day, like a CPA, you’re not in a position to direct someone.”

Even if the case seems straightforward, Armstrong encourages clients to seek guidance from an accountant.

There have been so many changes to the credit that IRS spokesman Michael Dobzinski had to consult his notes often to answer questions. Here are some helpful things the IRS wants you to know about the credits.

• The credits are available only to buyers purchasing primary residences. The IRS defines this has the residence where you spend most of your time.

• There are two credits available. One is for first-time buyers, or those who have not owned a home in the past three years. The maximum for this credit is $8,000 and, unlike a previous credit, this one does not have to be paid back. It applies to purchases made this year between Jan. 1 and April 30.

• The government broadened the credit in November to include some buyers who already own houses. Those buyers are eligible for a credit worth up to $6,500 for purchases made between Nov. 7 and April 30. In order to qualify, the buyer must have owned a primary residence for at least five consecutive years out of the past eight years. This credit also does not need to be paid back.

• There are income and price requirements. If the home was purchased after Nov. 6, it can cost no more than $800,000. Also, if purchased after that date, individuals cannot earn more than $125,000 and married couples filing jointly cannot earn more than $225,000.

• You don’t have to wait until 2010 to claim your credit, even if you buy this year. Purchase a home before the April 30 deadline and the credit can be claimed on this year’s taxes.

• If you’re claiming the credit, a paper filing is necessary. Only taxpayers not claiming the credit can file electronically. Dobzinski said buyers can still use electronic forms, but must print them out and mail them in, along with form 5405.

• Unlike last year, buyers claiming the credit must prove they are eligible. This is because some people filed for the credit last year, even though they had not purchased a home. You’ll need to send the HUD settlement statement along with the tax form. If you’re claiming the longtime owner credit, also include proof, such as copies of mortgage interest statements, property tax records or homeowner’s insurance records.

• Keep in mind that the credit is for your primary home. If you decide to rent or sell the home within three years, the credit must be repaid.

• Buyers claiming the credit will have to wait longer than usual to get the credit because of the need to file by paper. Expect to wait four to eight weeks, instead of the typical two weeks when filing electronically.

Copyright © 2010 Tampa Tribune, Fla., Shannon Behnken. Distributed by McClatchy-Tribune Information Services.

Your Credit Report - Helpful Tips for Home Buyers

by Brandon Cornett

When was the last time you saw a copy of your credit report? Do you know your credit score? Do you even know if it's good or bad?

If you can't answer these questions, you have some homework to do -- especially if you're planning to apply for a mortgage loan in the near future.

Here are some step-by-step instructions to help you obtain your credit reports, review them for accuracy, and correct any errors you come across.

Step 1 - Understand how your credit affects you.
When you apply for a home mortgage loan (or some other major purchase), you can be sure your credit will go under the microscope. Mortgage lenders will analyze your credit to find out what risk category you fall into.

When your credit score is high, your risk factor is low. In this scenario, you'll have a good chance of qualifying for a loan. But when the opposite is true -- low credit score and high risk factor -- you could have trouble obtaining a loan.

Credit reports are maintained by three credit reporting companies (sometimes called credit bureaus or agencies): Experian, Equifax and TransUnion. Your credit score is based on the information contained in these credit reports. Three agencies, three reports, three credit scores ... all about you!

Step 2 - Request copies of your credit report.
According to the Fair Credit Reporting Act (FCRA), you are entitled to one free credit report per year from each of the credit reporting companies -- Equifax, Experian, and TransUnion. To request your credit reports from all three companies, visit www.AnnualCreditReport.com, or call 1-877-322-8228.

If you request your report online, you should have access to it immediately. If you request your credit report through the toll-free number, it will be processed and mailed to you within 15 days.

Your credit report will not come with a credit score, so you'll need to purchase this separately. You can obtain your credit score by visiting www.MyFICO.com. This website is owned by Fair Isaac's, the organization that converts your credit reports into credit scores. Here's a quote from Fair Isaac's:

"FICO scores are your credit rating. Most lenders base approval on them. You have three FICO scores, one for each credit bureau, and you can only get all three from myFICO."

Step 3 - Review your credit reports for errors.
Examine your credit reports closely for any errors or inaccuracies. Make sure your personal information is correct and up to date. Check for loans or lines of credit that aren't yours, as this could be an indication of credit fraud. Anything at all that seems out of place, write it down for further investigation.

Step 4 - Start the correction process immediately.
Under the Fair Credit Reporting Act (FCRA), credit reporting companies are responsible for correcting inaccurate or incomplete information in your credit report. So don't hesitate to exercise your rights under this law.

If you only find errors on one report (for example, the one provided by Experian), you only need to contact the company associated with that report. Visit the company's website to find instructions on how to begin the correction process. By law, each credit reporting company must publish their correction requirements.

You can find these instructions on each company's website:
www.experian.com
www.transunion.com
www.transunion.com

Tell the company in writing what information is inaccurate. File a copy of your initial request, as well as any subsequent communication (such as their response to you). Start a folder and label it with "credit report" to keep your documents together. Keep the folder secure, as it will obviously contain sensitive information.