Now that we've reviewed the 2008 credit, let's take a look at the 2009 credit, it is by far the better of the two credits.
The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1.
For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.
First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. If you purchased your home within the 2008 dates, you can amend your 2008 return to claim the 2009 credit but you will have to pay back $500 of the money since the home was purchased in 2008. The remaining $7,500 does not have to be paid back. The $500 payback amount will be applied to your 2009 tax return when you file in 2010.
The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has more information on these options.
The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.
For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.
The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.
Basic information
Homes purchased in 2008
Homes purchased in 2009
Scenarios
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First-Time Homebuyer Credit
IRS Information Related to the American Recovery and Reinvestment Act of 2009
Showing posts with label IRS; Effectur. Show all posts
Showing posts with label IRS; Effectur. Show all posts
Thursday, June 4, 2009
Friday, March 20, 2009
Things you Should Know When Selling Your Home
People who sell their home may be able to exclude the gain from their income. Here are seven things every homeowner should know if they sold, or plan to sell their house.
Amount of exclusion. When you have gain from the sale of your home, you may be able to exclude up to $250,000 of the gain from your income. For most taxpayers filing a joint return, the exclusion amount is $500,000.
Ownership test. To claim the exclusion you must have owned the home for at least two years during the five year period ending on the date of the sale.
Use test. You also must have lived in the house and used it as your main home for at least two years during the five year period ending on the date of the sale.
When not to report. If you are able to exclude all of the gain from the sale of your home, you do not need to report the sale on your federal income tax return.
Reporting taxable gain. If you have gain which cannot be excluded, it is taxable and must be reported on your tax return using Schedule D.
Deducting a loss. You cannot deduct a loss from the sale of your home.
Rules for multiple homes. If you have more than one home, you may only exclude gain from the sale of your main home and must pay tax on the gain resulting from the sale of any other home.
Your main home is generally the one you live in most of the time.
For more information see IRS Publication 523, Selling Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Publication 523, Selling Your Home (PDF 194K)
Schedule D, Capital Gains and Losses (PDF 136K)
Tax Topic 701 — Sale of Your Home
Amount of exclusion. When you have gain from the sale of your home, you may be able to exclude up to $250,000 of the gain from your income. For most taxpayers filing a joint return, the exclusion amount is $500,000.
Ownership test. To claim the exclusion you must have owned the home for at least two years during the five year period ending on the date of the sale.
Use test. You also must have lived in the house and used it as your main home for at least two years during the five year period ending on the date of the sale.
When not to report. If you are able to exclude all of the gain from the sale of your home, you do not need to report the sale on your federal income tax return.
Reporting taxable gain. If you have gain which cannot be excluded, it is taxable and must be reported on your tax return using Schedule D.
Deducting a loss. You cannot deduct a loss from the sale of your home.
Rules for multiple homes. If you have more than one home, you may only exclude gain from the sale of your main home and must pay tax on the gain resulting from the sale of any other home.
Your main home is generally the one you live in most of the time.
For more information see IRS Publication 523, Selling Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Publication 523, Selling Your Home (PDF 194K)
Schedule D, Capital Gains and Losses (PDF 136K)
Tax Topic 701 — Sale of Your Home
Thursday, March 12, 2009
Can You Claim the Child Tax Credit?
With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $1,000 for each qualifying child under the age of 17.
A qualifying child for this credit is someone who meets the following criteria:
Age - Was under age 17 at the end of 2008
Relationship - Is your son, daughter, adopted child, stepchild or eligible foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these individuals or other eligible person who lived with you all year as a member of your household
Citizenship - Is a U.S. citizen, U.S. national or resident of the U.S.
Support - Did not provide over half of his or her own support
Lived with you - Must have lived with you for more than half of 2008 (note that some exceptions to this criteria exist)
The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:
Married Filing Jointly $110,000
Married Filing Separately $ 55,000
All others $ 75,000
In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as an “Additional” Child Tax Credit. The Additional Child Tax Credit may give you a refund even if you do not owe any tax. The total amount of the Child Tax Credit and any Additional Child Tax Credit cannot exceed the maximum of $1,000 for each qualifying child.
Form 8812, Additional Child Tax Credit (PDF 56K)
Publication 972, Child Tax Credit (PDF 128K)
Form 1040 (PDF 176K)
Form 1040 Instructions (PDF 1,101K)
Form 1040A, U.S. Individual Income Tax Return (PDF 136K)
Form 1040A Instructions (PDF 428K)
Tax Topic 606
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A qualifying child for this credit is someone who meets the following criteria:
Age - Was under age 17 at the end of 2008
Relationship - Is your son, daughter, adopted child, stepchild or eligible foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these individuals or other eligible person who lived with you all year as a member of your household
Citizenship - Is a U.S. citizen, U.S. national or resident of the U.S.
Support - Did not provide over half of his or her own support
Lived with you - Must have lived with you for more than half of 2008 (note that some exceptions to this criteria exist)
The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:
Married Filing Jointly $110,000
Married Filing Separately $ 55,000
All others $ 75,000
In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as an “Additional” Child Tax Credit. The Additional Child Tax Credit may give you a refund even if you do not owe any tax. The total amount of the Child Tax Credit and any Additional Child Tax Credit cannot exceed the maximum of $1,000 for each qualifying child.
Form 8812, Additional Child Tax Credit (PDF 56K)
Publication 972, Child Tax Credit (PDF 128K)
Form 1040 (PDF 176K)
Form 1040 Instructions (PDF 1,101K)
Form 1040A, U.S. Individual Income Tax Return (PDF 136K)
Form 1040A Instructions (PDF 428K)
Tax Topic 606
Back to Top
Monday, January 12, 2009
Do You Depreciate?
Generally, you can't deduct in 1 year the entire cost of property you purchased, either for use in your trade or business or to produce income, if the property has a useful life substantially beyond the tax year. Instead, you can depreciate it. You can spread the cost over a number of years and deduct a part of the cost each year.
What to Depreciate
The kinds of property that you can depreciate include machinery, equipment, buildings, vehicles and furniture. You can't claim depreciation on property held for personal purposes. If you use property, such as a car, for both business or investment and personal purposes, only the business or investment use portion may be depreciated. You may depreciate property that meets all 5 of the following tests.
It must be property you own.
It must be used in a business or other income-producing activity.
It must have a determinable useful life.
It must be expected to last more than one year.
It must not be excepted property (certain intangible property, certain term interests and property placed in service and disposed of in the same year). If you're depreciating property you placed in service before 1987, you must use the Accelerated Cost Recovery System (ACRS) or the same method you used in the past. For property placed in service after 1986, you generally must use the Modified Accelerated Cost Recovery System (MACRS).
Section 179
Under Section 179, there are limits on the amount you can deduct in a tax year. You can deduct up to $125,000 of the cost of eligible business property in 2007 (the limit is higher if you placed the property in service in a qualified enterprise zone, qualified renewal community property or GO Zone (certain parts of the area affected by Hurricane Katrina). This deduction is reduced if you purchase more than $500,000 (up to $600,000 in the GO Zone) of eligible property for the year. Real estate and property used mainly in connection with furnishing lodging are not eligible for this deduction. The eligible property must be acquired for business use and acquired by purchase.
Eligible property includes the following:
off-the-shelf software
machinery and equipment
property contained in or attached to a building, other than structural components
gasoline storage tanks and pumps at retail service stations
livestock
The Section 179 deduction can't exceed your taxable income from businesses (including wages) for the year.
Also Read:
Self-employment
Rental Income
Capital Gains and Losses
Form 1099
What to Depreciate
The kinds of property that you can depreciate include machinery, equipment, buildings, vehicles and furniture. You can't claim depreciation on property held for personal purposes. If you use property, such as a car, for both business or investment and personal purposes, only the business or investment use portion may be depreciated. You may depreciate property that meets all 5 of the following tests.
It must be property you own.
It must be used in a business or other income-producing activity.
It must have a determinable useful life.
It must be expected to last more than one year.
It must not be excepted property (certain intangible property, certain term interests and property placed in service and disposed of in the same year). If you're depreciating property you placed in service before 1987, you must use the Accelerated Cost Recovery System (ACRS) or the same method you used in the past. For property placed in service after 1986, you generally must use the Modified Accelerated Cost Recovery System (MACRS).
Section 179
Under Section 179, there are limits on the amount you can deduct in a tax year. You can deduct up to $125,000 of the cost of eligible business property in 2007 (the limit is higher if you placed the property in service in a qualified enterprise zone, qualified renewal community property or GO Zone (certain parts of the area affected by Hurricane Katrina). This deduction is reduced if you purchase more than $500,000 (up to $600,000 in the GO Zone) of eligible property for the year. Real estate and property used mainly in connection with furnishing lodging are not eligible for this deduction. The eligible property must be acquired for business use and acquired by purchase.
Eligible property includes the following:
off-the-shelf software
machinery and equipment
property contained in or attached to a building, other than structural components
gasoline storage tanks and pumps at retail service stations
livestock
The Section 179 deduction can't exceed your taxable income from businesses (including wages) for the year.
Also Read:
Self-employment
Rental Income
Capital Gains and Losses
Form 1099
Top Ten Tax Tips for Disaster Victims
Special tax law provisions may help taxpayers recover financially from the impact of a disaster, especially when the President declares a location to be a major disaster area. Both individuals and businesses in a federally declared disaster area can get a faster refund by claiming losses related to the disaster on the tax return for the previous year, usually by filing an amended return.
Here are the top 10 tips to help you get the proper benefits after a disaster:
Take photographs to document damage to your property or belongings. This will be helpful in calculating the amount of your loss. It may also prove beneficial to take photos showing the condition of the property after it is restored or replaced.
Keep your receipts. Certain expenses may be deductible or helpful in determining your loss. Receipts for contracting work can establish the extent of your loss and substantiate the use of insurance reimbursements (see item 5 below).
Food, medical supplies and other forms of assistance are not taxable, nor do these items reduce the amount you can claim as a loss unless they replace lost or destroyed items.
File your insurance claim in a timely manner. If your property is covered by insurance, it's important to file the claim as soon as possible because any reimbursement must be subtracted when calculating your loss.
Replace property with similar property to avoid paying taxes on any gain from insurance proceeds. However, replacement property does not have to match item-for-item. Because insurance proceeds for the home and its contents are considered a common pool of funds, you can use more of the money to replace the house than its contents, or vice versa. If you qualify, a gain related to a personal residence can be excluded using the sale-of-home exclusion rules.
Reimbursements for losses aren't taxable, unless you come out ahead by receiving more for the property than its basis (original cost plus the cost of improvements). Even if the reimbursement is more than the basis, you don't have to pay tax currently if you replace lost, damaged or destroyed items within 2 years after the loss occurs.
You may be able to claim a casualty loss on your tax return.
The loss amount is based on the lower of 2 numbers:
Either the price paid for the property plus any improvements (called the basis) prior to the casualty, or the property's decline in market value caused by the disaster, which, in some cases, can be determined by repair costs.
The deductible amount is reduced by insurance and most other nontaxable reimbursements.
If the property is not used for business, the deductible amount is reduced by 10% of the taxpayer's adjusted gross income and then reduced again by $100 ($500 for 2009). The 10% floor does not apply to net disaster losses sustained In 2008 or 2009.
A nonbusiness loss generally is claimed as an itemized deduction on Schedule A. But a net disaster loss sustained in 2008 and 2009 is added to your standard deduction. You don't have to itemize to claim these losses.
The cost of cleaning up or making repairs can't be considered part of your casualty loss. However, you can use the cost for repairs as a basis to determine the decrease in fair market value.
The IRS will waive fees and expedite requests for copies or transcripts of your federal tax return. If you need information from your tax return, use Form 4506-T, Request for Transcript of Tax Form, to request a transcript of your federal tax return. A transcript shows most of the line items from your return. You may also use Form 4506-T to request account information (payment of estimated taxes, etc.) and transcripts of W-2s and 1099s. If you need greater detail on prior returns than is provided by transcripts, you may request a photocopy of a prior return and any attachments by submitting Form 4506, Request for Copy of Tax Form. You may obtain these forms by calling the IRS toll-free disaster hotline at (866) 562-5227 or by going to www.irs.gov.
Special considerations for federally declared disaster areas:
You have up to 4 years after the close of the first year in which any gain was realized to replace your principal residence or pay tax on the gain.
You can choose to deduct a loss on the current-year return or amend the preceding year's return, whichever helps your current financial or tax situation the most.
You may have filing and payment deadlines postponed for a time specified by the IRS. Any interest that normally would apply to late payments is waived in this situation.
Also Read:
Disaster Relief
Amended Return
Address Changes
Here are the top 10 tips to help you get the proper benefits after a disaster:
Take photographs to document damage to your property or belongings. This will be helpful in calculating the amount of your loss. It may also prove beneficial to take photos showing the condition of the property after it is restored or replaced.
Keep your receipts. Certain expenses may be deductible or helpful in determining your loss. Receipts for contracting work can establish the extent of your loss and substantiate the use of insurance reimbursements (see item 5 below).
Food, medical supplies and other forms of assistance are not taxable, nor do these items reduce the amount you can claim as a loss unless they replace lost or destroyed items.
File your insurance claim in a timely manner. If your property is covered by insurance, it's important to file the claim as soon as possible because any reimbursement must be subtracted when calculating your loss.
Replace property with similar property to avoid paying taxes on any gain from insurance proceeds. However, replacement property does not have to match item-for-item. Because insurance proceeds for the home and its contents are considered a common pool of funds, you can use more of the money to replace the house than its contents, or vice versa. If you qualify, a gain related to a personal residence can be excluded using the sale-of-home exclusion rules.
Reimbursements for losses aren't taxable, unless you come out ahead by receiving more for the property than its basis (original cost plus the cost of improvements). Even if the reimbursement is more than the basis, you don't have to pay tax currently if you replace lost, damaged or destroyed items within 2 years after the loss occurs.
You may be able to claim a casualty loss on your tax return.
The loss amount is based on the lower of 2 numbers:
Either the price paid for the property plus any improvements (called the basis) prior to the casualty, or the property's decline in market value caused by the disaster, which, in some cases, can be determined by repair costs.
The deductible amount is reduced by insurance and most other nontaxable reimbursements.
If the property is not used for business, the deductible amount is reduced by 10% of the taxpayer's adjusted gross income and then reduced again by $100 ($500 for 2009). The 10% floor does not apply to net disaster losses sustained In 2008 or 2009.
A nonbusiness loss generally is claimed as an itemized deduction on Schedule A. But a net disaster loss sustained in 2008 and 2009 is added to your standard deduction. You don't have to itemize to claim these losses.
The cost of cleaning up or making repairs can't be considered part of your casualty loss. However, you can use the cost for repairs as a basis to determine the decrease in fair market value.
The IRS will waive fees and expedite requests for copies or transcripts of your federal tax return. If you need information from your tax return, use Form 4506-T, Request for Transcript of Tax Form, to request a transcript of your federal tax return. A transcript shows most of the line items from your return. You may also use Form 4506-T to request account information (payment of estimated taxes, etc.) and transcripts of W-2s and 1099s. If you need greater detail on prior returns than is provided by transcripts, you may request a photocopy of a prior return and any attachments by submitting Form 4506, Request for Copy of Tax Form. You may obtain these forms by calling the IRS toll-free disaster hotline at (866) 562-5227 or by going to www.irs.gov.
Special considerations for federally declared disaster areas:
You have up to 4 years after the close of the first year in which any gain was realized to replace your principal residence or pay tax on the gain.
You can choose to deduct a loss on the current-year return or amend the preceding year's return, whichever helps your current financial or tax situation the most.
You may have filing and payment deadlines postponed for a time specified by the IRS. Any interest that normally would apply to late payments is waived in this situation.
Also Read:
Disaster Relief
Amended Return
Address Changes
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