Homebuyer Tax Credit Expires April 2010

Good news for those who want to buy a home between now and April 30th of 2010! The Extended Home Buyer Tax Credit was included as part of the government’s plan to stimulate the U.S. housing market and help improve the difficult economy and all the challenges it brought with it. Congress recently passed new legislation that extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010. In addition, the new legislation expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010. If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service.

Year End Tax Tips for Homeowners

First, if you bought or sold a home in 2009, be sure to get a copy of your HUD closing statement from your Realtor or attorney, as you will need it for your tax return. It also pays to take an interest in your mortgage interest. The money you pay in interest on a mortgage is normally tax-deductible and can relate up to two mortgages, for a primary residence and second home, as long as they do not total more than a million dollars.

Homeowners qualify for a variety of residence-related tax deductions, some new this year. Moreover, a little financial housekeeping now can help you better prepare for the Taxman's April visit.

Quicken Loans 2009 tip list reminds homeowners that any points paid to buy down a mortgage rate this year may be written off by deducting the points proportionately over the life of the new loan. Thus, taking out a 30-year loan would allow you to deduct 1/30th of the points paid each year. Also, the tax help organization notes the tax deduction for homeowners paying private mortgage insurance exists through 2010. There are some restrictions, including that you must have refinanced or bought your home after Jan. 1, 2007, and have adjusted gross income under $110,000.

Veteran accountant David Perry of Friedman & Huey Associates in Park Ridge and Homewood said real estate taxes are another area to investigate with a tax professional. Generally, those who sold in 2009 can get a deduction for real estate taxes paid, directly or through escrow, but also on the taxes shown as a credit adjustment on HUD closing statements. Illinois real estate taxes are paid in arrears, so if you sold on June 30, your real estate taxes should be about 150 percent of a full year's taxes.

But there can be hurdles. Perry explained, "Homeowners subject to alternative minimum tax may not be getting full, or any, benefit for the real estate taxes they pay, nor on home equity loan interest. The economics of this is often overlooked and there may be ways to reduce, though not always eliminate, this disallowance."

And here's a tip for those who protested their too-high real estate taxes this year. Fees paid in conjunction with that protest qualify as miscellaneous itemized deductions -- whether or not you won.

Other changes this year relate to the $8,000 first time-buyer tax credit, or the newer $6,500 repeat buyer credit for those who qualify.

Also, there are new energy efficient tax credits for improvements to an existing home, such as qualifying new windows, doors, roofs, insulation, water heaters, and heating and cooling systems. Your contractor or the manufacturer must supply you with appropriate documentation.

Perry recommends, "Save the documentation, plus labels. Not all ENERGY STAR qualified products qualify for a tax credit, and if that's not confusing enough, the qualification rules are different for before and after June 1, 2009."

As always, when in doubt, consult a qualified tax professional.

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