I have one client dealing with an Eagle Idaho Short Sale that recently received a 1099-C for over $125,000!  If you are familiar with 1099’s… this is not treated as ordinary income on your tax return.  Thankfully, a 1099-C (C standing for Cancellation of Debt) may not affect you at all.

You see, thanks to the Mortgage Forgiveness Act of 2007, the tax burden for cancelled mortgage debt for primary residences may save you!  This Act which has recently been extended through 2012 is a lifesaver for people going through Foreclosures and Short Sales!  This Act allows up to 2 Million dollars (1 Million if married filing separately) to be excluded.  The key is the primary residence – this doesn’t apply to rentals, 2^nd homes, or investors.  Read more here at the government’s website.

What is “Cancellation of Debt”?

If you are going through a foreclosure or short sale, your lender is going to receive less than what is owed on your mortgage(s).  For example;

Original Purchase Price:              $300,000
10% Down Payment:                        $30,000

1^st Mortgage:                                    $243,000
2^nd Mortgage:                                    $27,000

Mortgages combined:                 $270,000

Through either the foreclosure or short sale, let’s say the lender is able to recoup $225,000 on this home.  There would be an unpaid balance of $45,000.  Nearly all the 225,000 will go to pay the 1^st Mortgage, and a small portion ($3,000) will go to the 2^nd Mortgage.

Your lender(s) may 1099-C you for $45,000, which is referred to Cancellation of Debt.

Question? Does this mean you’re off the hook for the $45,000 (even though the lender approved the foreclosure or short sale??).

Answer! NO.  You are still liable (this may depend on your state and whether you loan is a “recourse or non-recourse” loan.  Often the 1^st will be settled in the transaction, but lenders are going after homeowners for the 2^nd, HELOC’s, and if you did a loan with Mortgage Insurance… they may try to get a deficiency judgment.

In Idaho, lenders currently have 90 days for the 1^st Mortgage, and 5 years for the 2^nd to seek a deficiency judgment.

New legislation has been written to help with deficiency judgments (Program is called “HAFA”).

Like with any large decision, the discussions with a licensed real estate agent can and should get a lot more in-depth.  I hope to have gotten the ball rolling in that direction for you!

If I did, please give me a call so we can talk more about this!!  I can be reached at  208-288-2976 or at paul@Idahorealtyinfo.com.

Follow me on Facebook: homes@idahorealtyinfo.com

I look forward to talking to you soon,

Paul Wallin

Idaho Realty Info at Group One

Making Work Pay Credit

If you have earned income, such as from W2 wages, you may have noticed you had less withholdings.  This was because of the Making Work Pay Credit enacted last year as part of the Stimulus Act of 2009.  Instead of giving you one lump sum (like the year before), you had less withholdings throughout the year.  To offset this “underpayment”, you will receive a credit on your tax return.  It is 6.2% of your earned income but cannot be more than $400 ($800 if married filing jointly).  You will find this on line 63 of your 2009 tax return.

Unemployment Compensation

You do not have to pay tax on unemployment compensation of up to $2,400 per recipient.  Amounts over $2,400 are still taxable.

COBRA Subsidy

The 65% subsidy for payment of COBRA health care coverage continuation premiums is not taxable for federal income tax purposes.

Home Mortgage Principal Reductions

Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program are not taxable.

American Opportunity Credit

The Maximum Hope education credit has increased to $2,500 for most taxpayers.  The increased credit is now called the American Opportunity Credit and can be used for 4 years of college instead of 2.  Part of the credit may be refundable.

IRA Deduction Expanded

You may be able to take an IRA deduction if you were covered by a retirement plan and your 2009 modified adjusted gross income (AGI) is less than $65,000 ($109,000 if married filing jointly or qualifying widow(er)).  If your spouse was covered by a retirement plan, but you were not, you may be able to take an IRA deduction if your 2009 modified AGI is less than $176,000.

Deduction for Motor Vehicle Taxes

If you bought a new motor vehicle after February 16, 2009, you may be able to deduct any state or local sales or excise taxes on the purchase.  In states without a sales tax, you may be able to deduct certain other taxes or fees instead.  Take the deduction on Schedule A if you are itemizing deductions and are not electing to deduct state and local general sales taxes.  If you are not itemizing deductions, these taxes increase your standard deduction and are claimed on Schedule L.

First-Time Homebuyer Credit

The credit increases to as much as $8,000 ($4,000 if married filing separately) for homes bought after 2008 and before May 1, 2010 (before July 1 2010, if you entered into a written binding contract before May 1, 2010).  Did you buy a Meridian Idaho Short Sale?  Or did you sell your House for sale in Eagle Idaho last year??  You can choose to claim the credit on your 2009 return for a home you bought in 2010 that qualifies for the credit.  You generally must repay any credit you claimed for 2008 if you sold your home in 2009 or the home ceased to be your main home in 2009.

Move Up Credit

Long-time resident homebuyers can claim the Homebuyer Credit, but they must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009

Credit for Non-Business Energy Property

You May be able to take this credit for qualifying energy saving items for yourhomeplaced in service in 2009.

Standard Mileage Rates

The 2009 rate for business use of your vehicle is 55 cents a mile.  The 2009 rate for use of your vehicle to get medical care or to move is 24 cents a mile.

Earned Income Credit (EIC)

The EIC has increased for people with three or more children and for some married couples filing jointly.  You may be able to take the EIC if:

• Three or more children lived with you and your earned less than $43,279 ($48,279 if married filing jointly).

• Two children lived with you and you earned less than $40,295 ($45,295 if married filing jointly).

• One Child lived with you and you earned less than $35,463 ($40,463 if married filing jointly).

The maximum AGI you can have and still get the credit also has increased.  You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.  The maximum investment income you can have and still get the credit has increased to $3,100.

Tax on Childs Investment Income

The amount of taxable investment income a child can have without it being subject to tax at the parent’s rate has increased to $1,900.

Limit on Exclusion of Gain on Sale of Main Home

In certain cases, gain from the sale of your main home is no longer excludable from income if it is allocable to periods after 2008 when neither you nor your spouse (or your former spouse) used the property as a main home.

Electric Vehicle Credits

You may be able to take a credit for:

• A plug-in electric drive motor vehicle placed in service in 2009
• A plug-in electric vehicle bought after February 17, 2009.

Conversion of a vehicle to a plug-in electric drive motor vehicle place in service after February 17, 2009.

So in looking at this, there are lot’s of small deductions for this or that.  But the biggest deduction you’ll have is from your home!  If you bought or sold a home in Meridian, Eagle or Boise Idaho – or looking to buy or sale a home- contact me at 208-288-2976 or visit my website at www.idahorealtyinfo.com.

Need tax assistance… call Jodi at;

Jodi Whittaker, CPA, MST
Whittaker&Associates, Inc.

Certified Public Accountants

155 E. 50th Street
Boise, ID 83714

208.373.7890 p

Here’s to hoping you receive a LARGE REFUND!!!

Paul Wallin
208-288-2976paul@idahorealtyinfo.com
http://www.idahorealtyinfo.com

The Federal Reserve’s program of purchasing a total of $1.25 trillion of mortgage-backed securities is supposed to come to an end on March 31^st of this year.  The general consensus is that the Fed’s involvement in the market means that conforming fixed-rate mortgages are perhaps 75 basis points (0.75%) below where they would be if the program did not exist.

This means that you should expect interest rates to rise somewhat when the program expires.  For example, if you bought a House for sale in Eagle Idaho, with a $400,000 loan over 30 years, a .75 increase could result in as much as $70,000 additional in interest!  How much rates rise will depend on whether or not private investors will want to buy these investments, and how strong that demand will be – is all quite foggy at this time.  It’s best to plan for at least some increases in interest rates as the end of the program approaches and for a period of time after March 31, with perhaps as much as a half-point rise to start.

Want more information, give me a call at 208-288-2976 or email me at paul@Idahorealtyinfo.com and we can talk how this can affect your long term real estate plans.  Or, visit my website at www.idahorealtyinfo.com for more information.

A new market will soon open to those individuals who want to buy the low cost Meridian and Eagle, Idaho Homes with the purpose of fixing them up and selling them!!  There is plenty of inventory of Meridian, ID foreclosures in disrepair and repairing them could be made easier!!

There will be new rules in place to prevent predatory practices. First of all, deals must be “arms-length:” The parties in the sale can’t have the same interest.

This is designed in part to prevent homeowners from defaulting on a loan, then bringing in a friend to buy it from the bank at a rock-bottom price and return it to the homeowner at a slightly higher-than-rock-bottom price. In that scenario, the friend/flipper would make a profit and the homeowner would have a cheaper mortgage, all at the lender’s expense.

Another notable restriction prevents sellers from knocking the new price up more than 20 percent from its purchase price, unless an independent appraiser says the renovations justify that increase.

As long as you are renovating and selling houses is a “legitimate business activity, as long as they’re not turning around and making a substantial profit after beating up the bank for a low price.”

And since FHA loans have come to play an ever-more-important role in homebuying in the last two years, being allowed to sell to FHA buyers makes house flipping a lot more attractive.

If the short-sale proceeds were not sufficient to payoff their existing mortgage then they would not be eligible for new FHA financing.  They would be eligible for new FHA financing if the proceeds were sufficient to payoff their loan and they were current with their payments at the time of the short-sale.

Click here for FHA Shore Sale detailed information

The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years.

The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real-estate market a bigger boost while preventing real-estate investors from benefiting.

Many property experts have cited the credit as a reason for signs of recovery in the housing market in recent months. But that recovery was somewhat undercut by the September drop in new-home sales reported Wednesday.

The credit would be extended from its current expiration date of Dec. 1 to all contracts entered into by April 30, and closed before July 1. It is expected that income limits on people claiming the credit would be increased to $125,000 for singles and $250,000 for couples, from the current $75,000 and $150,000, aides said. The credit phases out for people making more than those amounts.

While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor. Senate Majority Leader Harry Reid (D., Nev.) hopes to add it to a bill currently on the Senate floor to extend federal unemployment insurance benefits. But agreement on that hasn’t been finalized.

While Senate Republicans are likely to support the measure, House Democrats have raised concerns that it carries a high cost to the government. The Internal Revenue Service is examining the program for alleged abuse.

Federal Reserve Chairman Ben Bernanke spoke on Capitol Hill last night and said that the low interest rate environment will likely be needed for a while.  However, he went on to say that as the economy heals, the Fed will hike rates quickly to ward off inflation.  This is exactly what we have been concerned about, and writing of and explaining those concerns to you for some time.  We certainly agree with Mr. Bernanke’s comments – and while inflation is not an immediate issue, it will become a problem down the road.  And the ending will not be pretty for rates.  There is no doubt that rates are going higher, and clients are simply foolish to not take advantage of the current environment, as it is highly unlikely that rates will ever be lower or even potentially equal to where prices have been over the past week.

The New York Federal Reserve purchased $20B in Mortgage backed securities in the latest week, bringing the year-to-date total to $924B out of the $1.25T allotted for the program.  Here’s a key point…let’s do some math.  The Fed will purchase $301B more through the end of March 2010, which is 25 weeks from now.  Simple math tells us that 301 divided by 25 equals about $12B per week in purchases, which the Fed may elect to do so as $24B every other week.  This is obviously a significantly lower amount of buying of MBS, which in turn, will lead to softer Bond prices and higher mortgage rates.  There’s no disputing the math.

Today – October 9th – is a very interesting anniversary day in Stock market history.  It marks the all time highs in the Dow and S&P, reached in 2007.  The Dow closed at 14,164 while the S&P 500 finished October 9, 2007 at 1,565.15.  It also marks the seven-year anniversary of the bottom of the bear market that lasted between 2000 and 2002.

Some housing analysts say that this will lead to tighter restrictions on FHA mortgages.

“It absolutely changes the political dynamic once you have to ask taxpayers” for money, says Lisa Marquis Jackson, vice president for John Burns Real Estate Consulting.

 The 10 states with the most FHA-insured mortgages are:

1. Texas
2. California
3. Florida
4. Georgia
5. Ohio
6. Illinois
7. Pennsylvania
8. Michigan
9. Virginia
10. North Carolina

Need help Buying | Selling | Consulting on Real Estate??  Give me a call at 208-288-2976 or email me at paul@idahorealtyinfo.com.  Also, if you need help sorting out loan information – call Steve or Toni at Riverside Home Loans 208-941-9385 or 208-850-5421.

The IRS is reportedly examining some returns with high deductions for mortgage interest and enforcing obscure rules that most home owners and many accountants could be unfamiliar with.

The calculations are very complex and rely on precise records that some home owners may have trouble producing

Experts advise home buyers who have borrowed more than $1 million in mortgages and home equity loans since 1987, the year deductibility limits were enacted, to consult a tax expert because the newest loan may not be tax deductible.

Source: Investment News Daily, Art Auerbach