2009 Tax Topics
New for the 2008 tax filing season:
First-Time Homebuyer Tax Credit | Heroes Earning Assistance and Relief Tax
Act of 2008 (HEART) | Extension of the Mortgage Debt Relief Act of 2007
First-Time Homebuyer Tax Credit
Have you recently purchased a home and you’re strapped for cash? This
offers a refundable tax credit to first-time homebuyers–up to $7,500 for
2008, and $8,000 for 2009!
2008 Tax Credit
- If you purchased your home in 2008, the credit is equal to the lesser of
$7,500 or 10% of the purchase price of the home. The amount of the credit
is reduced to $3,750 if you file using the status married filing separate.
- The credit is available to unmarried taxpayers.
- You must have purchased your home after April 8, 2008 and before
January 1, 2009.
- You must not have owned a home during the past three years.
- The credit is phased out (reduced) as your income goes up. So, for
instance, once your adjusted gross income exceeds $75,000 ($150,000 for joint
filers), only a reduced credit is available. Once your adjusted gross income
reaches $95,000 ($170,000 for joint filers) there is no credit available.
- While the IRS considers this a credit, it is actually treated like
an interest-free loan. The credit must be paid back over the next 15 years.
Repayment generally begins two years after purchase of your house by adding
a $500 tax bill for the next 15 years.
- You claim the credit by filing Form 5405 with your 2008 tax return
Expanded 2009 Tax Credit
- Under the Recovery and Reinvestment Act, if you purchased your home
in 2009, your credit is expanded to the lesser of $8,000 or 10% of the purchase
price. If you are married filing separately you can claim up to $4,000.
- You must have purchased your home between January 1 and December
1, 2009.
- If you purchase your home during this period, you may be able to
choose whether to claim the tax credit on this year’s tax return, due
April 15th, or your 2009 tax return.
- You do not need to pay the 2009 tax credit back, provided the home
remains yours for 36 months after the purchase date.
- This credit is also available to unmarried taxpayers, and the same
income requirements apply as for the 2008 credit.
Heroes Earning Assistance and Relief Tax Act of 2008 (HEART)
Did you serve in a combat zone in 2008? Combat pay is tax-free but it used
to make some service personnel ineligible for the Earned Income Tax Credit.
- Under HEART, combat pay is treated as earned income and will be
included for EITC calculations.
- HEART also allows service members to receive a stimulus rebate even
if their spouse does not have a Social Security number.
- Lastly, HEART allows service members to make early withdrawals from
their 401(k) retirement accounts without having to pay the usual 10% early
withdrawal penalty.
Extension of the Mortgage Debt Relief Act of 2007
- Normally, the IRS can tax any debt that is discharged (meaning that
you do not have to pay back the loan). However, the Mortgage Debt created
an exception for debt discharged in a foreclosure.
- Recently, the foreclosure exception has been expanded to cover a
greater amount of time.
- Now, taxpayers who go through a foreclosure between January 1, 2007
and December 31, 2012 will qualify for this exception.
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Notice
© Pine Tree
Legal Assistance
March 2009
Sometimes the laws
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