Time for Fax Review

You must note the effects on two tax years as you mull over potential options...2009 and 2010. To be successful, you want to cut your total tax bill over both years, not just one. Most filers will benefit by accelerating their deductions from 2010 into 2009 and deferring income until 2010. But if you expect to be in a higher tax bracket in 2010, consider the reverse…accelerating income and delaying deductions. Income tax rates won’t change in 2010. The Bush tax cuts are set to lapse after 2010, raising the top rate back to 39.6%. Congress won’t act to accelerate that change. And any surtax on high-income folks, such as the one in the House’s health care overhaul legislation, wouldn’t be effective until after 2010.
Take a look at some strategies involving provisions set to lapse soon. First time home buyers won’t have to act by Nov. 30 to get a tax credit. Congress will extend the $8,000 credit for several months, well into 2010, so first timers will not have to hurry up and close their home purchases by Nov. 30. Prospective buyers who already own a home should wait a brief time to buy. Congress is working on a bill that expands the credit beyond first time purchasers, giving a $6,500 credit to buyers who’ve owned a home for five of the last eight years. This would apply to homes bought after enactment, which should occur by mid-Nov.

The worst U.S. housing crash since the Great Depression has led to a record number of foreclosures and shaved almost a third off property values. The S&P/Case-Shiller Index of 20 cities in August was 29 percent below its 2006 high, after rising for four consecutive months.

“We are bumping along the bottom of the housing market,” said James Lockhart, vice chairman of WL Ross & Co. and the former director of the Federal Housing Finance Agency. “There is the potential for another swing down.”

Sales of new U.S. homes fell 3.6 percent in September to an annual pace of 402,000, the Commerce Department said yesterday. That was lower than the 440,000 median forecast of 75 economists surveyed by Bloomberg News.

The Federal Reserve will complete its $300 billion Treasury purchase program today amid signs the seven-month buying spree helped stabilize the housing market and limited increases in borrowing costs. Expect mortgage rates to start to slowly increase based on this news.

Mortgage Rate News today

New Home Sales were reported at 10am ET – and the latest trends for housing have shown encouraging signs. Back in January, the inventory levels reached a high of 12.4 month supply. And although today's number showed 7.5 month supply, which is worse than last months 7.3 reading, it is still a big improvement from where we were in January.
Senate negotiators are still working on the passage of a bill that would extend the First Time Homebuyer tax credit, but were unable to get a final vote completed yesterday.
Bill Gross said on CNBC this morning that the Fed will eventually stop purchasing Mortgage Bonds, which could lead to lower Bond prices…and higher interest rates ... now is the time to refinance!