Mark Johnson Custom Homes Blog

The House passed the unemployment extension bill that contains the homebuyer tax credit extension/expansion and NOL carryback this afternoon. The final tally was 403 to 12. There was a very strong bipartisan showing.

Once signed into law the bill will:

• Extend the $8,000 credit for first-time home buyers for sales contracts entered into by April 30, 2010 and closed by June 30.
• Expand to include a new $6,500 credit for owners of existing homes who are purchasing a new principal residence.
• Increase income eligibility limits to claim the full credit amount to $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return.

The bill now goes to the White House.  It is not known yet when the bill will be sent over to the President or when it will be signed, other than it is expected to occur quickly. Stay tuned for the latest update from the WCFHBA. In the meantime, more information is available here. 

Net Operating Losses and Small Home Building Companies

There is some confusion about who can use the NOL carryback. Some smaller volume members view this as a provision that only benefits “the big guys.” It is not just corporations who can use the carryback provision, but also our smaller builders who are pass-through entities. Below is information that describes how smaller builders can use NOLs just like corporations can. Ultimately, they may need to discuss their unique situations with a qualified tax professional.  

• Pass-thru entities (e.g. partnerships, LLCs, S corps, etc — basically everything but sole props and C Corps) do not claim NOLs, and thus do not have a need for a carryback.
• In fact, according to the IRS SOI data, 50 percent more loss deductions are claimed on individual tax forms (due to sole props and pass-through entities) than are claimed on corporate tax forms.
• Corporations are more likely to have losses because of their nature. But smaller builders who are C Corps or are pass-through entities will benefit.
• However, NOLs are like other deductions (and revenue for that matter) in that they are passed-through to the owners/partners. The carryback rules are applicable at the individual level.
• Small home builders will benefit from an expanded NOL carryback period.
• IRS Publication 536 explains the rule for using the present law carryback on individual tax forms, including loss deductions that are due to pass-through variables from partnerships and S Corps.
• There are certain other rules that complicate things at the individual level (most notably the passive loss rules), but there can still be a benefit.
• It is true that most small builders do not have “losses” like the big national builders. They will simply slow down and have profits go to zero.

Information Courtesy of the Wilmington-Cape Fear Home Builders Association

St. James Plantation Builder Mark Johnson Custom Homes would like to share with our readers the latest on the New Home Buyer Tax Credit extension. RealtyTimes.com’s Kenneth R. Harney reported this morning on the latest Senate plan which would continue to offer the $8,000 tax credit through November 30, 2009 and create a $6,500 tax credit for previous homeowners of five consecutive years that now would like to purchase another as their main residence. Below is an excerpt and to read the complete article, click here!

“That would still be enough, sponsors of the plan believe, to encourage people now on the sidelines to get into the market for new and existing homes in early 2010 – and thereby help stimulate the economy and create jobs.

The Senate plan would also raise household incomes limits for the credit to $125,000 for single buyers and $250,000 for married couples – far more generous than the current $75,000 and $150,000 maximums.

Extending the $8,000 credit, as it is now, has heavy bipartisan support on the House side as well. But key Democratic leaders there – and at the Obama White House – are concerned about the costs.

The current $8,000 credit costs the Treasury about a billion dollars a month in lost tax revenues, according to Congressional budget estimates. Opening up the program to existing home owners – even in a restricted way – would add to that cost.

On the other hand, limiting any extension to six months would be less expensive than a full-year extension, as advocated by major housing lobbies, including the National Association of Realtors and the National Association of Home Builders.”