Tuesday, March 31, 2009

NOW OR LATER? WHEN TO CLAIM YOUR $8,000 FTB TAX CREDIT

With the deadline for filing federal tax returns fast approaching, I have clients asking about whether 2009 buyers can claim their $8,000 tax credit on their 2008 tax return. The answer is YES.

Even if you don't close by April 15, you can still claim the credit this year. Read on to find out how...

The basic eligibility requirements for the credit are: the home must have been purchased on or after Jan. 1 and before Dec. 1, 2009; the buyer may not have owned a home in the three years prior to the purchase; and the buyer must have a modified adjusted gross income (MAGI) less than $95,000 for single tax payers or $170,000 for married filers.

Two factors affect the amount of credit qualified buyers can claim: it can only be equal to 10% of the purchase price of the home, up to a maximum of $8,000; and it is reduced for buyers with an AGI (adjusted gross income) of more than $75,000 for single filers, and $150,000 for joint-filers.

To claim the credit, buyers must complete IRS Form 5405 to calculate the amount of the tax credit, and enter it on line 69 of the IRS 1040 income tax return.

Qualified buyers have several options for when to claim the tax credit, but they can claim it only after the purchase of the home is complete.

Buyers who complete their home purchase prior to April 15, 2009, can easily claim the credit on their 2008 income tax return.

If the qualifying home purchase will be completed shortly after April 15, buyers can file an extension for tax year 2008 and claim the credit when they file their 2008 return, which must be done by October 15. Or home buyers can claim a qualified purchase on their 2009 income tax return, which they will file in 2010.

Some things qualified buyers should take into consideration when deciding whether to claim the credit on their 2008 or 2009 returns include how quickly they need the refund and their expected income for 2009.

For more information, visit http://www.federalhousingtaxcredit.com/, or give me a call and I'll put you in touch with a qualified tax professional.