Welcome to 2009. I have gathered a list of important 2008 tax issues that everyone should be aware of.
1) First Time Homebuyers $7,500 Tax Credit
Legislation passed in 2008 allowing for first time home buyers to receive up to $7,500 tax credit for a home purchase between April 9, 2008 and June 30, 2009 (A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 tax credit would owe nothing to the IRS) Of course this will have to be repaid to the federal government over 15 years. It acts more like an interest free loan which can be very beneficial for new homeowners or young couples just starting out! There are several guidelines to who is eligible and more information can be found at the government’s official website http://www.federalhousingtaxcredit.com/index.html or by consulting with your accountant.
2) Transfer Tax Exemption
In case you are unaware, when you sell a home in Michigan you must pay a transfer tax (a name for real estate sales tax) generally in the amount of $8.60 per $1,000.00 of the sales price. There was an important opinion by Michigan Attorney General Mike Cox in 2008 clarifying the proper application of this obscure exemption of the Michigan Transfer Tax Act. A seller may seek an exemption from paying the state transfer tax if the following criteria are met:
- The property must have been occupied as a principle residence, classified as homestead property;
- The property’s State Equalized Value (“SEV”) for the calendar year in which the transfer is made must be less than or equal to the property’s SEV for the calendar year in which the transferor acquired the property; and
- The property cannot be transferred for consideration exceeding its true cash value (twice the SEV) for the year of the transfer.
Evidently this exemption will only apply to a select few sellers (of the 50 transaction sides that Oltersdorf Realty closed in 2008 none met the criteria) but this number could increase in 2009. This is one of the many reasons it is very important to be informed about your properties taxable and SEV assessments. For example a sale price of $500,000 would save the seller $4,300 if they meet all 3 of the criteria. Please consult your accountant regarding the specifics of this exemption.
3) Receive Principal Residence Tax Exemption on 2 Homes!
In 2008 Governor Granholm signed House Bill 4215, enacting Public Act 96 of 2008, which amended Section 211.7cc of the General Property Tax Act of 1893. The amendment enables a person who has established a NEW principal residence IN MICHIGAN to retain a Principal Residence Exemption (PRE) on property previously exempt as the owner's principal residence. All of the following must be met:
- Must have previously been the owner's principal residence
- The home is currently for sale
- It is not occupied
- It is not leased
- It is not used for any business or commercial purposes
You must apply for this principal residence exemption by May 1, for the 2009 tax year. This is simply another benefit for home owners who have moved to another home within Michigan and are yet to find a buyer for their previous primary home. Please visit the official Michigan.Gov website for more information by clicking HERE.
This was a lengthy blog entry and if you would like more information on any of these topics, please contact Jonathan or Vicky Oltersdorf at 231-271-7777 or through email at RealEstate@Oltersdorf.com.
Entry Written By Jonathan Oltersdorf