The ongoing foreclosure crisis in this country is enough to make any potential homebuyer nervous. What’s more is that the deadline for the federal tax credit has passed for most taxpayers, and Congress has showed little interest in extending the credit. However, there are still plenty of other great reasons to purchase a home in 2010.
1. Recession Prices
While the market has had some recent hikes in sales – mostly because of the expiring credit and increased action by real estate investors – the total number of homes for sale still outweighs the number of potential buyers. Therefore, home prices are still at their rock bottom, “recession” level prices. However, as real estate sales continue to increase—home values and prices, are likely to rebound.
2. Local Credits
While the federal homebuyers tax credit has expired, dozens of states and local government agencies are offering significant incentives to purchase a home. Despite their economic struggle, California just reinstated a tax credit for homes bought in the state. The program was so popular last year that it ran out of funding in only four months. However, the $200 million put towards the program, which began May 1st, will provide residents up to $10,000 in tax incentives to buy a house.
3. Exceptions to the Rule
While for most of us, the federal credit is no longer an option, there are a few exceptions to the rule. If you are a member of the armed forces or federal employee who was serving outside the U.S during the past year, you may qualify for a one-year extension to claim the credit. Eligible taxpayers will need to enter in to a binding contract on or by April 30, 2011, and close escrow by June 30, 2011.
4. Green Homes
If you intend to make energy efficient upgrades to the home you purchase, you may be able to qualify for a handful of “green” tax credits. There are significant incentives to add solar panels to your home, as well as lesser credits to install energy saving appliances, windows, and heating/cooling systems.
5. Renovation Costs
In addition to making green upgrades, if you plan to make any renovations to a house you are buying then now is the time to do it. The unemployment rates among contractors are at an all time high and you should be able to keep your labor costs low. Additionally, prices for common remodel materials such as granite counters, tiles, carpet, etc. have all gone down over the past few years.
6. Safer Loans
After the major bank bailout occurred, it became clear to everyone that some financial reform was necessary to protect both our economy and American taxpayers. Among the many changes that have occurred, banks have become somewhat tighter on their qualification requirements, making it hard to get approved for a loan that you might not be able to afford.
7. Mortgage Deductions
When you think about the annual expense associated with buying a home, be sure to remember that there are a handful of very valuable mortgage deductions. The IRS will allow you to deduct all interest paid towards your mortgage on your tax return, as long as it is less than $1 million. This can significantly lower your tax bill, and you may even be able to adjust your withholdings to get some of this money throughout the year.
8. Real Estate Taxes
In addition to deducting mortgage interest, you can also deduct any property taxes that you pay your local government agency. Although most homeowners itemize their returns, you can take advantage of the property tax deduction even if you take the standard deduction.
If you are thinking about starting a business, then working from home can be a great way to start small while also take advantage of the valuable home office deduction. However, keep in mind that the IRS is strict about claiming deductions for a home office, so be sure to check with a local tax professional before taking the deduction.
10. Investment Opportunity
If you have a secure job, and are looking for an investment opportunity you can control, then you should consider real estate. As I explained earlier, property prices are at an all time low and if you can afford to buy a home, you should see its value increase over the next few years.