(ARA) - A wide range of tax law changes over the last year will result in considerable savings for millions of Americans on their 2009 federal tax returns. Homebuyers and homeowners have some of the most to gain from the changes.
Understanding the qualifications for home-related credits can be confusing and intimidating. Jessi Dolmage, spokeswoman for 2nd Story Software, the makers of TaxACT, breaks them down.
"If you've never owned or haven't owned a principal residence during the three years prior to the purchase date, you may qualify for the First-Time Homebuyer Credit. The purchase date must fall after April 8, 2009 and before May 1, 2010, with closing to take place before July 1, 2010. It's equal to 10 percent of the purchase price, up to a maximum of $8,000. You only have to repay the money if the home ceases to be your primary residence or is sold within three years of purchase," says Dolmage.
Property cannot be acquired from a relative, and married taxpayers must both qualify as first-time homebuyers if filing jointly. The credit can be claimed on a 2009 return or an amended 2008 return.
The Worker, Homeownership and Business Assistance Act of 2009 extended the credit's closing date from Nov. 30, 2009, to April 30, 2010, and added rules for homes purchased after Nov. 6, 2009, including:
* You must be at least 18 on the purchase date (only one spouse must be 18) and cannot be claimed as a dependent.
* Purchase price cannot exceed $800,000.
* If the sale doesn't close by April 30, 2010, you may still qualify if there's a binding contract to purchase by that date. The sale must close before July 1, 2010, and the credit cannot be claimed before the closing date.
Purchase date and modified adjusted gross income (MAGI) determine credit phase out. If the purchase date was before Nov. 7, 2009, full credit is available to those with an MAGI up to $75,000 ($150,000 for joint filers). If you have an MAGI between $75,000 and $95,000 ($150,000 and $170,000 for joint filers), you're eligible for reduced credit. Higher incomes do not qualify.
If the purchase date is after Nov. 6, 2009, full credit is available to those with an MAGI of up to $125,000 ($225,000 for joint filers). If your MAGI falls between $125,000 and $145,000 ($225,000 and $245,000 for joint filers), you could receive a reduced credit. Higher incomes don't qualify.
"Current homeowners looking for a different or new home may also qualify for the First-Time Homebuyer Credit," Dolmage says. "The Worker, Homeownership and Business Assistance Act modified the credit to allow for up to $6,500 if you purchase a replacement home before April 30, 2010. You must have lived in the same principal residence for a five-consecutive-year period during the eight-year period that ends on the purchase date of the replacement home."
In addition:
* You must buy, or enter into a binding contract to buy, a principal residence after Nov. 6, 2009, and before May 1, 2010, and close on it before July 1, 2010.
* The credit phases out for those with an MAGI between $125,000 and $145,000 ($225,000 and $245,000 for joint filers).
* 2009 purchases must be claimed on a 2009 return; 2010 purchases can be claimed on a 2009 or 2010 return.
All homeowners can claim tax credits for green improvements. The Residential Energy Property Credit is worth 30 percent, up to $1,500, for improvements such as adding insulation or installing energy-efficient windows, doors, or heating and air conditioning systems. Bigger improvements involving alternative energy equipment, like solar hot water heaters, geothermal heat pumps and wind turbines can be claimed under the Residential Energy Efficiency Property Credit. This credit is equal to 30 percent of the cost of the qualified property, with no limit on the maximum amount of the credit available.
New tax laws also include breaks for children, college expenses, new vehicles, unemployment and several other areas. Information about all 2009 tax law changes can be found at www.IRS.gov.
"You can see exactly how the changes will affect your 2009 taxes with TaxACT Free Federal Edition," Dolmage adds." With TaxACT, all taxpayers can prepare, print and e-file their IRS return for free. Go to www.TaxACT.com to get started."
Courtesy of ARAcontent
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