Taxpayer asks:
Do you have any advice for how SELLERS should best take advantage of the credit? Should we advertise about the credit with our real estate listings?
Taxgirl says:
That’s a great question!
I think the credit is a real selling point (though I’m not a fan of the concept). It definitely makes sense to advertise it. I just think you have to be careful not to provide legal advice or create an unfair expectation. I’ve seen some banner ads that say, “Buyers may qualify for up to $8000 in tax credits! See your tax professional for more information.” That makes sense because you’re not making promises or giving advice that might haunt you later.
You could even promote the credit on your website. I’ve seen some real estate folks doing a brief promo for the credit and then link to the IRS web site. You could even link to say, a reputable tax blog, like, oh, I don’t know, taxgirl.com.
What I wouldn’t do is promise the credit is applicable or give the impression that you’ll “help” complete the form 5405. Why would you want that kind of headache? Let the buyer’s accountant or tax preparer handle it.
So yes, go ahead and promote the credit as part of your marketing strategy. That was the intent of Congress: to get the real estate market moving again. People can’t take advantage of the credit if they don’t know about it.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
Taxpayer asks:
Does a duplex qualify as a main residence for first time home buyer credit purposes? If the person is going to live in one unit and rent the other unit do you have to allocate the purchase price for calculating the amount of the credit?
Taxgirl says:
Assuming that you otherwise qualify for the first time home buyer credit, the answer to your question is yes so long as the home is your main home. The IRS considers your main home where you live “most of the time” – that means that vacation properties or second homes would not qualify. But you are allowed to rent out part of your “main home” and still claim the credit, so long as the other requirements are met.
One quick caveat: Descriptive terms for real estate vary from place to place. I live in Philadelphia where each half of a duplex/twin is a separate residence – it’s described differently on the deeds and taxed as a separate parcel. Down South, where I grew up, a duplex is one parcel that’s divided with separate entrances. I am assuming that you mean the latter. Obviously, if you’re buying two separate residences – even if attached – both would not qualify as your “main home.”
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
And why does it matter on a tax blog?
Consider this. You buy a house in the midst of a housing boom. Prices go up, up, up. Subprime mortgage mess hits. Other credit woes ensue. Housing market drops. As in plummets. And suddenly, your house isn’t worth as much as you thought.
Sound familiar? It should. Because it is happening all over the country.
And the worst bit for many folks? Property taxes.
Yep. Property taxes. Most property taxes are based on assessments. What if assessments are updated when the market is on the way up – but not on the way down?
Many municipalities rushed to take advantage of the increased tax base by making new assessments (my own city of brotherly love, for example) as prices went up. However, now that many homes aren’t worth what the homeowners believed, those assessments are painful. And those same municipalities aren’t as keen to re-assess back down. Instead, many homeowners are being forced to appeal high property taxes based on revised values – some providing as many as three appraisals (at hundreds of dollars each) to taxing officials.
What do you think? Should municipalities in highly volatile areas be required to reassess quickly? Is it a fair thought that the market may bounce back and an across the board reassessment is inefficient and costly, therefore warranting a “wait and see” approach? Or do you get what you get?
Pennsylvania State Senator Vincent Fumo has lately found himself in a whole heap of trouble. He is facing a whopping 139 indictments including 2 counts each of filing false tax returns and aiding and assisting in the filing of false tax returns.
To pay for some of his massive legal bills in conjunction with the charges, Fumo is selling his Philadelphia manse – for $7 million. While that kind of dough wouldn’t cause anyone to blink in New York or LA, that’s a pretty nice abode here in Philly. But what’s more interesting is that the Philadelphia Inquirer is reporting that many of the improvements to the house were made at taxpayer’s expense. That’s ironic, huh? Using money from taxpayers to fight charges of tax fraud?
The evidence that the Inquirer offers includes an email to a Fumo aide that reads:
We are still having trouble with the front door intercom. Please get this fixed ASAP.
Apparently, the aide who was paid out of government money spent most of his 18 months in “nearly a full-time capacity” as project manager for the renovations to Fumo’s home (note to self: next time planning home renovations, consider full-time project manager – that extra powder room took far too long to coordinate on your own). Did the aide do a good job? He must have. In just 13 years, the value of the home went from $175,000 to $7 million. Even in a health real estate market, that’s quite a climb.
Another aide allegedly cleaned Fumo’s home on a regular basis on a taxpayer’s dime.
Of course, Fumo denies the indictments, blah, blah, blah and claims that the charges are political.
The bit that I love the most? On this web site listing, which I believe is the home in question (how many $7 million homes are for sale on Green Street?), the description points out that “no expense was spared” – they left out the “at taxpayer’s expense” part.
