Christina Dunham's Random Real Estate Musings

A terrific article on QuickenLoans.com outlines 10 Tax Deductions you can take as a homeowner:

To read the complete article, visit http://www.quickenloans.com/mortgage-news/top-ten-tax-deductions-for-homeowners-5311 

According to the IRS, there are four general categories of tax deductions that you can take as a homeowner. They are:

- Real Estate Taxes

- Sales Taxes

- Home Mortgage Interest

- Mortgage Insurance Premium (issued after January 1, 2007)

There are guidelines as to how these deductions can be claimed and itemized on your tax returns, so be sure you are working with your CPA or tax professional on how to claim them correctly. For complete details, check out: http://www.irs.gov/publications/p530/ar02.html

What Would You Do with $8,000?

What if the government decided today that, instead of bailing out Wall Street, it was going to give every American $8,000? What would you do with the money?

For most Americans, paying off credit card debt would be a great way to use the free money. According to a Nielson Report released in April 2009, the average credit card debt per household in the US was $8,329 at the end of 2008. That money from the government would almost wipe out your debt completely. Imagine being completely debt free.

Healthcare is a big topic these days. According to the most current Census Bureau statistics, some 45.7 million Americans do not have health insurance. So, many Americans might choose to use their $8,000 to enroll their family in a healthcare program through their employer. The federal government tracks the average spending on health insurance for people with job-based coverage, and the most recent figures (from 2005!) indicate that the average individual's premiums were $3,991, while families spent an average of $10,728. Your $8,000 would go a long way in insuring your family.

Some Americans might choose to start a small business. Experts estimate that start-up costs for many new business ventures are between $10,000 to $15,000. With $8,000, a large portion of your initial investment would be covered.

If you really think about it, there are so many things you could do with $8,000. You could open a 529 college savings plan. You could take your family on an amazing once-in-a-lifetime vacation. You could open an IRA and save for retirement...

But what's the point in dreaming. The government's not giving away $8,000, right?

Wrong.

Right now, through November 30th of this year only, the government is giving qualifying first-time home buyers up to $8,000 for purchasing a home (or up to 10% of the purchase price). This is free money that you do not have to pay back. And here's the best part: if you qualify, you can get your money from the IRS this year, even if you've already filed your 2008 taxes.

There are certain income restrictions and rules for repayment. The new law does not affect people who purchased a home after April 8, 2008, and on or before December 31, 2008. For taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains at 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

With today's combination of lower home prices and lower interest rates, this temporary incentive from the government is really a great option for many Americans who act now to finally fulfill their dreams of owning a home.

Christina Dunham is a Mortgage Banker at Bay Equity, a commercial, residential and FHA Direct Lender. She may be reached at contact@christinadunham.com.

What goes up must come down. During the housing boom of 2003 to 2006, property values in the Bay Area experienced double-digit appreciation with buyers bidding up to $100,000 over list price just to be considered for the sale.

Today, values for single family homes in California are back to 2000 levels, with the February 2009 median home price at $247,590 statewide. This represents a drop of almost half from just a couple of years ago, and the first time since 1999 that home values have dipped below the $300,000 threshold. In 2006, the height of the housing boom, the media price for a single family home in California was $535,700.

With foreclosure bargains flooding the market, home values continue to get pushed lower, creating opportunities for first-time homebuyers. As such, sale of existing homes has increased around the Bay Area, up 26.1 percent from just 12 months prior. Around the San Francisco/Bay Area, foreclosure sales represent 52 percent of home sales.

Good news from homebuyers, bad news for homeowners. However, this represents an opportunity for those who purchased their homes after January 2002. Proposition 8, passed by California voters in November 1978, allows for a temporary reduction in assessed value when properties suffer a “decline-in-value” – when the current market value of your property is less than the current assessed value.

County Tax Assessors statewide are reviewing hundreds of properties for an automatic reduction of property taxes. San Mateo County, for example, is currently conducting a review of 45,000 properties for a potential value re-assessment, and corresponding property tax reduction. San Mateo County provides this service for free for its residents.

If you feel you qualify for a tax reduction, contact your county Tax Assessor’s Office directly. No need to hire a “property tax review” company to do this for you, as the county typically does not charge for this service. All you need is a bit of patience on your part in completing the necessary forms.

Make sure you have the following information handy:

- Your Full Property Address

- Assessor’s Parcel Number APN) found in your Property Tax Bill

- The Current Assessed Value as indicated in your Property Tax Bill

- Your opinion of Current Market Value (consult an appraiser for a more accurate figure)

- The Original Purchase Date

- A List of Supporting Documentation confirming your Opinion of Value (such as an appraisal report or comparable sales report)

Below is a list of recommended websites:

Alameda County – visit http://www.co.alameda.ca.us/assessor/reassessments.htm

Contra Costa County – visit http://www.co.contra-costa.ca.us/index.asp?nid=191

Sacramento County – go to http://www.assessor.saccounty.net/DeclineinValueReassessments/SAC_ASR_DF_Decline_Value

San Francisco County - http://www.sfgov.org/site/assessor_index.asp?id=92

San Mateo County - complete the form online at http://www.smcare.org/library/forms/forms_declineapp.asp.

Santa Clara County – check out http://www.sccassessor.org/portal/site/asr/ for more information

Solano County - visit http://www.co.solano.ca.us/depts/assessor/default.asp for filing instructions

If your county is not part of this list, simple Google “<county name> decline in value assessor.” Good luck!

Until next week, Happy Home Loan Shopping!

Christina Dunham is a Mortgage Advisor with Bay Equity, a commercial, residential and FHA Direct Lender. She may be reached at contact@christinadunham.com.

Government Bail-out for First-Time Homebuyers

Before you file your taxes this year, don't forget about the $8000 tax credit (or 10% of the home’s value, whichever is less) for first-time home buyers, which was enacted by the 2008 American Housing Rescue and Foreclosure Act. Designed to help stimulate interest in the housing market, this temporary provision provides a first-time home buyer (someone who hasn't owned a home in the last three years) a tax credit of up to $8000 for homes purchased between January 1, 2009 and December 1, 2009.

Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit, “ said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”

It's not the $15,000 credit that Lawrence Yun, chief economist for the National Association Realtors (NAR) wanted to see. But Yun said, "The $8,000 credit will bring an additional 300,000 new homebuyers into the market. The credit could also create a domino effect," he said, "because each first-time homebuyer sale will lead to two more trade-up transactions down the line."

Basically the tax credit is an interest-free loan from the government to help you offset the costs of home ownership. But here's the best part. The law allows qualified taxpayers to take the credit against either their 2008 or 2009 taxes. Unlike the $7,500 credit from the previous stimulus bill, this is a true tax credit, in that it doesn't have to be repaid, as long as the buyers remain in the home for at least 3 years.

This means, if you qualify, you can buy a house this year before the end of the year and receive the credit on the 2008 tax returns you're filling out right now. Imagine having an extra $8000 in cash to pay bills or credit cards or even pay for renovations on your new home. If you choose to utilize the credit on your 2009 returns, your tax professional can help you reduce income tax withholding up to the amount of the credit. This will help you to increase your take-home pay throughout the year to save money for a down payment for a qualified purchase before December 1^st.

Qualified taxpayers who have already completed their returns and filed for the $7,500 credit can file amended returns for 2008 to claim the credit. You can download the necessary form from the IRS website at http://www.irs.gov/pub/irs-pdf/f5405.pdf. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations, and repayment of the credit.

There are certain income restrictions and rules for repayment. The new law does not affect people who purchased a home after April 8, 2008, and on or before December 31, 2008. For taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains at 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

Although the building industry was pleased with the credit, the $15,000 credit "would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB).

Christina Dunham is a Mortgage Advisor with Bay Equity, a commercial, residential and FHA Direct Lender. She may be reached at contact@christinadunham.com.