Wednesday, March 17, 2010

How current homeowners can benefit from the tax extension

The long-timer homebuyer tax credit, as part of the first-time homebuyer extension from November 2009, is set to expire April 30, 2010. Current homeowners may be unaware of this longtime or “move-up” tax credit available to them. An encouraging point for buyers in this economy on top of already low housing prices would be the additional $6,500 tax break available through the credit.

Homeowners who have lived in their home for five years or more can qualify for a tax credit on a new home purchase. This extra $6,500, which is filed on the homebuyers’ tax return, can be spent on building such items as granite counter tops or that bonus media room they have always wanted, or to help alleviate moving costs.

Other stipulations come with the credit, including income and purchase price maximums. For the November 2009 extension, the modified adjusted gross income limitation at which the credit will begin to be phased out is increased to $125,000 for single taxpayers and $225,000 for joint taxpayers. As well, no credit will be given for the purchase of any residence if the purchase price exceeds $800,000.

There are many options available for homebuyers to claim the credit.
  • File an extension – Taxpayers who have yet to file their 2009 returns but will purchase a home can request a six-month extension to Oct. 15, 2010, allowing homebuyers to include the home purchase on their 2009 taxes.
  • File now, amend later – Taxpayers due a sizable refund from the 2009 taxes can file now, purchase their home and then file an amended return later this year to claim the homebuyer credit.
  • Claim in 2010 – For some it may make sense to claim the homebuyer credit in 2010, such as if 2010 income will be less than 2009 due to job loss or drop in investment income.

Photo Source: Tracy O

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