Mar

Helpful Information about New Tax Credits

Cindy Johson | V.P./ Division Manager, Sales

More info on tax credits for homebuyers AND homeowners!(Written by Cindy Johnson of Morris and Raper Realtors)

The government’s $787 billion economic stimulus package includes several opportunities for individuals and families to lighten their tax load. Of particular interest are the tax savings specifically geared for homebuyers and homeowners

The new tax laws have specific limitations, so people need to pay close attention. Of course, all tax-related actions and decisions should be reviewed by a professional tax advisor. So the following is meant to simply get the conversation started.

1. $8,000 tax credit for first-time homebuyers. A first-time homebuyer is anyone who has not owned a home in the last three years. To qualify for the full $8,000 tax credit, couples filing jointly must earn less than $150,000 in adjusted gross income for 2009. The home must be closed on by November 30 of this year. THIS CREDIT COMPLETELY GOES AWAY ON DECEMBER 1, 2009.

Now get this – if closing on a home before they file their 2008 tax returns can elect to take the credit on those 2008 taxes. But they’ll only get a $7,500 tax credit, even though they bought their home in 2009. If they can wait to take the credit when they file their 2009 tax return next year, they’ll get the whole $8,000. For more information, visit the National Association of Homebuilders website.

2. Green tax credits for homeowners. There is now a $1,500 lifetime tax credit for home improvements such as energy-efficient windows, doors, mechanical systems and insulation.

PLUS: Homeowners can now take a 30% tax credit for every dollar they spend on green upgrades like solar heaters, heat pumps and fuel cells. The credits apply through 2010.

These tax credits are a great help to sellers wanting to make their homes more attractive.

For more information, visit a recent story posted by Newsday.com.

3. Tax relief on short-sale and foreclosure forgiveness. This benefits homeowners who experience a short sale or foreclosure where the proceeds are less than the amount owed on the mortgage. In the past, that forgiven debt had to be treated as taxable income. But from now through 2012, the forgiven debt will NOT be taxed as income. There is a limit of up to $2 million of forgiven debt on the principal residence. Taxpayers do not have to put the amount on their tax form, even if they receive an IRS Form 1099 from the lender. For more information on short-selling, visit a recent story posted by Tuscon Citizen.com.

Tax credits are the best form of tax relief. They are a direct dollar-for-dollar reduction of your tax liability – and for first-time homebuyers, if the credit is larger than the tax liability, you get a refund!