Finance Articles

Form 5045 Could Mean Thousands in Homebuyers' Tax Credits

The First Time Homebuyers' Tax Credit is a government measure to strengthen a crumbling housing market. In order to be eligible, you have to purchase, or have had purchased, your first primary residence between January 1, 2009 and April 1, 2010. In order to actually apply for this new tax credit, you have to file form 5045: the First Time Home Buyer credit form. Beyond the actual purchase of the home, there are a few other stipulations for those considering filing form 5045. For houses purchased before November 6, 2009 you are ineligible if your singly filed income is above $75, 000 or your jointly filed income is above $150, 000. For houses purchased after November 6, 2009, you are ineligible if your singly filed income is above $125, 000 or your jointly filed income is above $225, 000.

5045 - The Short Form That Could Mean a Big Tax Credit

The government has introduced several measures that seek to bolster a flagging housing market. One, the First Time Homebuyers' Tax Credit, does exactly what you'd expect: provides a tax incentive to those purchasing a house for the first time. Like anything government-related, however, there's paperwork involved: the 5045 form. Before you actually file the 5045 form, you should make sure you're actually eligible for the First Time Home Buyer's Credit. Qualified applicants must be 18 or older, and neither they nor their spouse can have ever purchased a house. If filing singly, the applicant can't have an income of greater than $75, 000 (if the house was purchased before November 6th, 2009) or $125, 000 (if the house was purchased after November 6th).

A Property Tax Loan is a Great Solution

Texas has some of the highest property tax rates in the country and, in a state where property values have held despite the recession, this can cause a problem for many homeowners. Property owners in Texas should be aware that property tax loans can help, even before delinquencies, penalties and foreclosures have been assessed. A tax loan consolidates the delinquent taxes, penalties, and interest on the debt into a loan with affordable monthly payments. The tax loan lender is the recipient of a tax lien, in security for the loan. Loans are available for nearly every type of property as long as there is no IRS lien or bankruptcy against the property, and it is well maintained.

Special Tax Rules on the Sale of Your Home

If you sell your home the IRS rules permit you to exclude up to $500, 000 of the gain ($250, 000 if you are single) on the sale. In order to qualify for this exclusion you must have owned and used your home at least two years out of a five-year period ending on the date of the sale (known as ownership & use tests). The best part about this gain exclusion rule is that it is not a one-time exclusion. You can exclude gains on subsequent sales as well, as long as you meet the ownership and use tests. Special rules regarding the capital gain exclusion: 1. Death of Spouse - As long as the sale of your home occurs within two years of your spouse's death, you are eligible for the gain exclusion.

Paying Property Taxes in the Fifty States

Property taxes on land and the buildings occupying land are not imposed by state law, but by municipalities. This makes for quite a variety of applications and requirements. Property taxes are an important source of revenue for the jurisdictions in which they are applied. The role of the state is to set a maximum standard for the application of property tax. The local tax assessor then determines what value the standard (usually a percentage) is applied against. While it is impossible to escape property tax entirely in the United States, certain parts of the country apply a lower standard than others. Most states offer a break on property taxes to older citizens and forty states offer homestead exemptions or tax credits that limit the value of assessed property that is subject to property taxation.

Types of Property Taxes

There are a lot of different taxes that are imposes all over the globe. Tax that is imposed towards the owners of certain property within their jurisdiction by the municipalities is known as Property Tax. Property tax or also known as mileage tax in certain countries around the globe are normally according to value of the property itself. The tax is one type of ad valorem which an owner of a property is needed to pay a certain value of tax based on the value of the property. Properties are group under three different categories: Land, Personal, and improvement to land. Land defines the land itself, personal are define as movable man-made objects on the land and this make the immovable man-made objects such as buildings under the category of improvement to land.

Investing in Tax Delinquent Property

There are several options open to those with an interest in investing in tax delinquent properties. Among these options are the right to purchase the outstanding property taxes in exchange for a tax lien, the right to collect a high interest rate on the outstanding taxes of anywhere from 12% to 24%, the right to foreclose on the property if the owner does not pay off the lien and interest in a reasonable amount of time, and the right to sell the property at public auction. Investing in tax delinquent property is almost always a winning situation for the purchaser of the tax lien. No matter which of the scenarios we have outlined above, the investor stands to walk away with a good profit on his or her investment.

Questions and Answers About Property Taxes

If you are unable to pay property taxes in time, there are severe consequences ahead. Even if you are moving on in the process of filing bankruptcy, you need to attend to these property tax obligations. Pick up a few tips on how to manage delinquent property taxes from these useful questions and answers. Can I lose my home if I don't pay property tax? Yes. The municipality in which you live will auction your home in a tax sale if you do not pay your property taxes within a specified time period. What is a delinquent tax? A delinquent tax is a tax that has been forwarded to the County Treasurer for collection. What does it mean if my property is in forfeiture?

Avoid Delinquent Property Taxes

Every property you own is subject to property tax. There is no avoiding it. You are going to have to pay every year, no matter what. Ignoring this obligation is the worst thing you can do, as penalties and interest will accrue on your delinquent property taxes until they have been paid or your property faces a tax sale. At a tax sale, an investor has the option to purchase a tax lien certificate. When the investor purchases the tax lien certificate, they have purchased your tax debt and will now subject you to repayment at a rate of 12% to 24%, or possibly higher. You generally have about a year to repay the tax debt and the interest to the investor, or face foreclosure of your home.

Lien Priority Unsecured Debt

A home could have several liens against it and each lien has a different priority. Lien priority is based on when the lien gets recorded. However, state property taxes and IRS tax liens have special privileges. They take priority over liens that are in a senior position relative them, so it doesn't matter what junior position they have. They could be in 6th or 7th position. It doesn't matter. For instance, lets say your 1st mortgage lender has foreclosed on your home and sold it via auction or trustee sale. State property taxes would have to be paid first, then the 1st mortgage gets what is left over. If there is still equity in the property, the IRS has 120 days to redeem the property and use that money to satisfy any tax liens.

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