The recently approved economic stimulus package includes a $8,000 maximum tax credit for first-time homebuyers in 2009.  Below are the top 7 frequently asked questions (FAQ’s) about the tax credit.

1. Who is eligible for the Home Buyer tax credit?

First time home (new or used) buyers are eligible for the tax credit. You must purchase a home on or after 1/1/2009 and before 12/1/2009.  Remember the purchase date is the date when you close and the title of the property transfers to you as the home owner.

2. What is the defined as a first-time home buyer?

Per U.S. laws, a first-time home buyer is a buyer who has not owned a residence during the three-year period prior to the purchase. For married taxpayers, the couple’s homeownership history has to be tested to determine if they qualify for first-time home buyer status.  If one party of a married couple has owned a home within the three-year period, then the couple will not be eligible for the tax credit.

3. How is the tax credit amount calculated?

The tax credit is 10% of a house purchase price up to $8,000 maximum.

4. What are the income requirements for claiming the tax credit?

Single tax payers with a modified adjusted gross income (MAGI) of more than $75,000 and married couples with a MAGI of more than $150,000 will see a reduction in the tax credit. For single tax payers with MAGI of more than $95,000 and married tax payers over $170,000 the tax credit is zero.

5. How do I claim the first time home tax credit?

You will claim the tax credit on your federal income tax return.  You well need to complete IRS Form 5405 to determine the tax credit and then claim it on Line 69 of your 1040 income tax return.  It’s a pretty easy!

6. What types of homes will qualify for the tax credit?

Any home that will be used as your primary residence will qualify, which includes single-family detached homes, townhouses, condominiums, manufactured or mobile homes and houseboats.

7. What does it mean by the credit being refundable?

If the tax payer has little or no federal income tax liability that can be reduced by the credit, the IRS will send you a check for the credit.

Dollar Savings Direct, a division of Emigrant Bank, is offering a 2.65% APY to open a savings account. This is definitely one of the highest rates being

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Below is a very interesting video created by CNBC about the current mortgage melt down.

CNBC Originals: House of Cards

According to the Tax Policy Center, about 97% of American households will see tax savings as a result of President Obama’s American Recovery and Reinvestment Act signed into law last Tuesday.

The average savings would be about $1,179, however, savings will depend on income, marital status and number of children in a household.

Savings will range from a few hundred dollars to several thousand. The Recovery and Reinvestment Act contains a range of tax breaks which includes:

• Making Work Pay credit worth up to $400 ($800 for joint filers)
• A patch to protect middle and upper middle-income families from having to pay the Alternative Minimum Tax
• Expansions of the earned income tax credit and the child tax credit for low-income families.
• New credit for first-time homebuyers
• Sales tax deduction for car buyers
• Credit to help pay for college tuition
• For out of work individuals receiving unemployment benefits, the first $2,400 will be tax-free.
• Various tax breaks for small businesses

Under the new economic recovery plan, households will reduce their taxes as follows:

The government has already taken action on the broadest of the law’s cuts, the Making Work Pay. The Treasury Department has already told employers to reduce the amount of taxes withheld from paychecks by April 1, which will allow the typical family to begin taking home about $65 more per month.

First time homebuyer’s tax credit can be claimed on 2008 tax return if the home purchase occurs between January 1, 2009 and before November 30, 2009. However in many cases, households will not see any of their stimulus savings until they file their 2009 tax returns, which will be in 2010.

After much debate, President Barack Obama’s $787 billion economic stimulus package was finally by Congress. The package calls for spending $185 billion this year, which should increase GDP (Gross Domestic Product) by 1.4% to 3.8% and create 1 to 2 million jobs. The plan is to shorten the recession, which is defined by a negative GDP growth. The stimulus package should also calm the stock market.

So what does the stimulus package actually cover? Below is a basic breakdown of 7 areas of where the money will be spent.

Relief for Families – $260 billion over 10 years

• $2,500 college tuition tax credit
• $8,000 tax credit for first-time homebuyers in 2009
• A tax deduction of sales tax on new car purchases
• Extension of unemployment benefits
• Suspension of taxes on unemployment benefits through 2009
• Reduce taxes by $400 for individuals and $800 for families
• Pay $250 to each recipient of Social Security, veterans pension and SSI benefits
• $70 billion to continue the Alternative Minimum Tax (AMT) tax shelter
• For the working poor Greater access to child tax credit
• Expand earned-income tax credit to families with 3 children

Expand Health Care

• $24 billion: Subsidize COBRA benefits for laid off workers
• $87 billion: Assist states with Medicaid
• $10 billion: National Institute for Health
• $17 billion: Modernize health (IT) information technology systems

Improve Education

• $54 billion: School districts and states
• $21 billion: School modernization
• $17 billion: Increase Pell Grants
• $13 billion: Head Start
• $12 billion: Special Education programs

Modernize Federal Infrastructure

• $46 billion: Transportation and mass transit projects
• $31 billion: Modernize federal buildings
• $6 billion: Water projects

Increase Alternative Energy Production

• $17 billion: Renewable energy tax cuts
• $5 billion: Weatherize homes

Invest in Science Research and Technology

• $10 billion: Science facilities
• $4 billion: Increase broadband infrastructure
• $4 billion: Science research and physics

Assist Small Businesses

• $54 billion: Assist small businesses by various tax incentives and write-offs

The basic overall plan for spending all this money is to:

• Encourage consumer spending via tax rebates.
• Help businesses revitalize the economy, especially small businesses.
• Assist states from raising property taxes or cutting needed services.
• Create public works construction to retain or add 3 million jobs, and lower transportation costs.

Once the danger or a recession is over, all incentives should be removed, and then Obama’s plan is to reduce the deficit and avoid future inflation. Only time shall tell if President Obama’s plan will work. The next few months will be very interesting!

The video below is a very interesting animation/visualization of the current credit crisis.  The title of the video is “The Crisis of Credit Visualized” and is created by Jonathan Jarvis.

“The Crisis of Credit Visualized” by Jonathan Jarvis

Owners of Chase Business Credit Card can qualify for a $200 bonus for opening a Chase Business Checking account. For those of you who don’t have the Chase Business Credit Card, you can get a $100 bonus. Chase will deposit $200 or $100 into your new Chase Business Checking account within 10 business days of confirming the $500 deposit requirement.

A $500 minimum deposit is required and you can choose from four different plans based on the size of your business and the services you require. The least expensive option allows up to 200 transactions per month and provides several ways to have the monthly maintenance fees waived, such as linking your new checking account to your credit card account. The offer ends March 28, 2009.

Visit the following links ($200 bonus or $100 bonus) to print the coupon and bring it to your local Chase Bank or call 1-800-CHASE24 (1-800-242-7324).