Homebuyer's Tax Credit...Update

From the IRS, regarding the tax credit.  It has been improved to include current homeowners and the income limits have been raised.  Here straight from the IRS:

First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify 

WASHINGTON — A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers.
The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.
The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.
But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.
For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.
A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.
A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.
Income Limits Rise
The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
New Requirements
Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law:

• Dependents are not eligible to claim the credit.
• No credit is available if the purchase price of a home is more than $800,000.
• A purchaser must be at least 18 years of age on the date of purchase.

Retirement Plan for Self Employed Individuals

Many self employed individuals use a KEOUGH or SEP IRA as their retirement plan.  If you have the cashflow to make even greater contributions than these two plans allow, you should consider a solo 401k.  It is fairly easy to set up.  The great part is you can contribute as both employer and employee.  An individual can contribute a total of up to $49,000 per year or $54,500 if over age 50.  However, you have until December 31, 2009 to make your 2009 contributions.  If anyone is fortunate enough to have had a good year and can afford to make a larger contribution to your retirement plan, you should think about the solo 401k.

Financial Literacy

NYPL has a campaign for financial literacy program with lots of great free programs at the Library in NYC.  Pass this information along to anyone who really needs to get started on financial literacy.  Here is the link for the website:
http://www.nypl.org/financialliteracynow/index.html

Anytime I can get involved in the process of education the masses on financial issues, I love to do it.  Much of the volunteer work I do is here in Westchester as we are trying to get more programs started here.  Within the city, there are already some fantastic programs and this is indeed one of them.  If there is a group or an event you would like a financial planner to speak at, please go to www.fpaghv.org.  That is the Financial Planning Association in Westchester County where I am currently Chairperson.  We can find a good speaker for you depending on the topic you are looking for.

October Return Numbers

October was a down month for most segments of the stock market, the first probably since February of this year.  Hefty positive returns for the year abound--especially in growth stocks (like technology stocks) and small company stocks.  Here you go:

The Monthly Index Report for October 2009

Index	Oct-09	QTD	YTD	Description
S&P 500 Index*	-2.0%	-2.0%	14.7%	Large-cap stocks
DJIA*	0.0%	0.0%	10.7%	Large-cap stocks
Nasdaq Comp.*	-3.6%	-3.6%	29.7%	Large-cap tech stocks
Russell 1000 Growth	-1.4%	-1.4%	25.4%	Large-cap growth stocks
Russell 1000 Value	-3.1%	-3.1%	11.3%	Large-cap value stocks
Russell 2000 Growth	-7.0%	-7.0%	20.2%	Small-cap growth stocks
Russell 2000 Value	-6.6%	-6.6%	8.6%	Small-cap value stocks
EAFE	-1.2%	-1.2%	28.0%	Europe, Australasia & Far East Index
Lehman Aggregate	0.5%	0.5%	6.2%	U.S. Government Bonds
Lehman High Yield	1.8%	1.8%	51.7%	High Yield Corporate Bonds
Calyon Financial Barclay Index**	-1.1%	-1.1%	-3.0%	Managed Futures
3-mo. Treasury Bill***	0.0%	0.0%	0.3%
All returns are estimates as of October 30, 2009. *Return numbers do not include dividends. ** Returns are estimates as of October 29, 2009.

Home Buyer's Tax Credit

It looks like the tax credit is going to be extended, though it has not passed yet, according to the WSJ in an article on Oct 29,2009.  From the article:

"The Obama administration blessed the proposed extension of the $8,000 tax credit for first-time home buyers on Thursday as the Senate neared a compromise that would extend the credit to more potential buyers.... 
First-time home buyers are eligible for up to $8,000 on the tax credit, which is the same as the current credit. The Senate version of the bill creates a new credit of up to $6,500 for homeowners who have lived in their homes for five years. That provision would start on Dec. 1....
The tax credit phases out for home buyers with incomes above $125,000 for single filers and $225,000 for married couples. Also, homes that cost more than $800,000 aren’t eligible for the credit."

Important information that may be helpful to you.  

No COLA increase for social security recipients

There will be no cost-of-living-increases for recipients of social security.  If you remember, last year there was an almost 5% increase.  That's bad news number one.
The second piece of bad news is there are no COLA increases for contributions to 401k/403b plans.  Contribution limits will remain at $16,500 per year and $5,500 catch up contribution for those 50 or older.  This means for anyone older than 50, you can put away a total of $22,000 a year.