First-Time Homebuyer Tax Credit
Posted by Kim Perkins on October 12th, 2008
Okay, so what’s up with that new first-time homebuyer tax credit so many of you have heard about?
To be eligible for the first-time homebuyer credit:
· You must not have owned a home as your primary residence in the past three years (so it isn’t really a first-time homebuyer).
· You must have purchased your new home between April 8, 2008 and July 1, 2009. (For a home you build, the purchase date is considered the first date you occupy the home).
· Oh yeah! The home must be in the United States.
· For single, head of household and other non-joint filers; you qualify if your modified adjusted gross income is under $95,000. You qualify for the full first-time homebuyer credit at under $75,000 and there are phase out limits for adjusted gross incomes between $75,000 and $95,000. The limits are doubled for joint filers.
What situations make you not eligible for the first-time homebuyer credit:
· Modified adjusted gross income above $95,000 for single filers and above $170,000 for joint filers.
· You buy your home from a close relative (defined as spouse, parent, grandparent, child or grandchild).
· You stop using your home as your main home.
· You sell your home before the end of the year.
· You are a nonresident alien.
· You are or were eligible to claim the District of Columbia first-time homebuyer credit for any taxable year.
· Your home financing comes from tax-exempt mortgage revenue bonds.
· You owned another main home at any time during the three years prior to the date of purchase of your new main home.
How much is the first-time homebuyer credit:
First, to call it a credit is something of a misnomer. It’s actually more like an interest free loan. I’ll explain that part later.
The credit is 10% of the purchase price of the home, up to $7500.00. That means if the purchase price of your home is $100,000.00 you will receive $7500.00. If the purchase price of your home is $60,000.00 you will receive $6,000.00.
Here is the calculation:
Purchase price multiplied by .10 = potential credit. Maximum credit is $7500.00.
$100,000 * .10 = $10,000.00 Credit is over $7500.00 so credit is $7500.00.
$60,000 * .10 = $6,000 Credit is under $7500.00 so credit is as calculated or $6,000.00.
The credit is the same for single or married joint filers.
The credit is cut in half if you are married filing separately.
When can you take the first-time homebuyer credit:
· For purchases between April 1, 2008 and December 31, 2008 you can take the credit on your 2008 tax return.
· For purchases between January 1, 2009 and July 1, 2009 you can take the credit on your 2008 return, your amended 2008 return or your 2009 return.
How does it work:
The tax credit is a refundable credit which means even if you owe no taxes you will get the money. If you do owe taxes the tax amount will be reduced by your credit. If your credit is more than the tax you owe, you will receive the balance as a refund.
Fabulous? We think so!!
Okay, Here’s The Skinny on the Payback Period (interest free loan):
Starting two years after the tax period you claim the credit for, you are required to payback the credit to the government via your tax return.
If you claim it in 2008 you start paying on your 2010 tax return. For 2009 returns you begin payback in 2011.
You will pay in 15 equal installments. For $7500.00 credits our payback is $500 per year. Just divide your credit by 15 to get the yearly payback figure.
Then each year you simply add that figure to tax you owe and pay it in.
Well we think this is a fantastic opportunity for those of you out there looking to purchase your first home. Here is the down payment money. How you say? If you can find a way to borrow the money for your down payment, like on a credit card, then you can pay that off as soon as you receive your credit.
If you like what you see here and want to take advantage of the opportunity, call us and we’ll give you the name of wonderful people you can work with to make this dream come true.
If you want to discuss the tax implications in more detail please also give us a call.
Finally, if you need help claiming this tax credit and any others you might be eligible, come see us. We’ll make sure to maximize all your deductions and prepare the best tax return possible.
To your wealth!!
Kim Perkins
Yes The IRS is Human!
Posted by Kim Perkins on September 4th, 2008
Many of you know about the capital gain exclusion that is available when you sell your primary residence. It allows you to reduce the capital gains on the sale of your home, thereby reducing your taxable income. To qualify, you must have lived in the home for two of the last five years and you may not have used the exclusion in the last two tax filing years.
For single taxpayers the exclusion of capital gain is $250,000. For joint filers the exclusion is $500,000.00. In order to claim this exclusion please be sure you have proper documentation of the cost basis of your home. Capital gain is figured as: Sale price minus cost basis equals capital gain (Sale – Cost = Gain). So if your cost basis was $100,000 and you sell your home for $500,000 (we wish) you would have a $400,000 capital gain. If you are a single tax payer you only pay tax on $150,000 of this gain. If you are a joint filer you pay no tax on this gain.
Remember, even if you haven’t lived in your home for the past three years; if you lived in it the two years before that, you can still claim the exclusion. You must have lived in the home two of the last five years. This happens when you move for a job or some other reason and perhaps rent the home for a couple of years before you sell it. It could also happen if you marry, and move in to your spouse’s home. When you sell your former home you would still qualify for the exclusion.
Okay, now let’s say you’ve been living in your current home for a year and a half, and you claimed the exclusion one year ago when you sold your previous home. In your new home some sort of traumatic event happens like a home invasion, where your spouse is murdered (God forbid). You seek counseling and try to work through the issues but aren’t completely able to resolve those problems. You decide to sell the home you’ve lived in for just under two years and relocate to a “safer” neighborhood. There is a provision in the tax code to take a partial exclusion on the new capital gains even though you have taken the exclusion in the past two years. The taxpayer can request a private letter ruling from the IRS explaining the circumstances. If the IRS rules that the taxpayer could not reasonably have anticipated the situation before purchasing and moving into the new home, the IRS can grant a partial exclusion (meaning you get to eliminate a portion of the capital gain on the sale of your new home) due to unforeseen circumstances.
A Less Taxing Experience - Good Recordkeeping
Posted by Kim Perkins on July 12th, 2008
Keeping Good Records
You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. Good recordkeeping will help you remember the various transactions you made during the year, which in turn may make filing your return a less taxing experience. We all would like that.
Records help you document the deductions you’ve claimed on your return. This is extremely important should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer. Ideally, these types of items should be kept for three years after the disposal of the property (selling the property or cashing in stocks etc).
In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return:
• Bills
• Credit card and other receipts
• Invoices
• Mileage log .pdf or Mileage Log .xls
• Canceled, imaged or substitute checks or any other proof of payment
• Any other records to support deductions or credits you claim on your return.
Good recordkeeping throughout the year saves you time and effort at tax time when organizing and completing your return. If you hire a professional to complete your return, the records you have kept will assist the preparer in quickly and accurately completing your return.
For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Remember that for the genuine IRS Web site be sure to use .gov. Don’t be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www .irs.gov.
Economic Stimulus Payment Not As Much As You Expected?
Posted by Kim Perkins on June 3rd, 2008
Most of the questions posed to me these days are people asking me why their economic stimulus payments are not as much as expected. Here are some of the reasons why:
-
You are single and your net income tax liability is less than $600. If you file Form 1040 net income tax liability is the amount shown on Line 57, plus the amount on Line 52.
-
You are married and your net income tax liability is less than $1,200.
-
You are single and your adjusted gross income (AGI) is more than $75,000. On Form 1040, AGI is the amount on Line 37.
-
You are married filing a joint return and your AGI is more than $150,000.
-
You owe back taxes that reduced your payment.
-
You have non-tax federal debts such as unpaid student loans or child-support obligations that reduced your payment.
Remember that the $600 per person and $1200 per couple is a maximum. There is a minimum of $300 per person, $600 per couple and it is based on your tax liability.
As for the children on your return, the $300 per child only counts for children who qualify for child tax credits. Any child who has reached 17 does not qualify. So your college students, who are dependents on your return, and your older teenagers still living at home will not get you an extra $300.
I hope this helps. For more tax advice, tips, tricks etc sign up for my monthly e-newsletter: www.greenappleresources.com . Your private email information is safe with us. We only use it for this newsletter and our direct communication with you.
Regards,
Kim Perkins
Economic Stimulus Payment - Tax Rebate
Posted by Kim Perkins on May 22nd, 2008
Economic Stimulus Payment - Tax Rebate
Hi All,
There have been a lot of questions and misunderstandings about the economic stimulus payments so let me see if can help clear it all up.
The “tax rebates” are not rebates or income really. They will not be taxed on next year’s return. This it how it will work as I understand it.
The amount of your economic stimulus payment is calculated based on your 2007 tax return. However, the payment you received is really a tax credit toward the taxes you will pay for 2008. Let’s say your payment check was for $300 but you are single and could have received as much as $600. When you file your 2008 return, if your tax liability is $600 or more you will get to take the remaining $300 as a tax credit. In other words, you pay $300 less on next year’s taxes.
Now let’s use the same scenario but say that your tax liability for the year is only $200. The IRS will NOT collect back any monies it has already distributed so you get to keep the extra $100. Nice huh?
I hope this is all clearer than mud. Feel free to ask questions or post comments regarding the economic stimulus payments. It’s another that the IRS continues to confuse us all. Have a great week!
Kim Perkins
At The Core
The Birth of a New Blog
Posted by Kim Perkins on May 12th, 2008
New Blog - So here it is. My first post in our new blog. A birth, so to speak, of a new service offered by Green Apple Resources (GAR). It is my vision that this blog will provide information regarding bookkeeping services and tax preparation for small businesses in NH and beyond. I will do my best to keep the information here current. One more way GAR is striving to meet customer needs.
This blog is where I’d like you to begin to learn about your tax status and undersand tax planning. Let’s blog about your company and what it needs for bookkeeping services. What’s the best accounting software for your bookkeeping needs?
Let’s say that you want to know when the tax “rebates” are due to go out. You could ask me in a comment on my blog. I’d reply with this link about the tax rebate dates. Then you can click on it and go to a nifty page on the IRS website that tells you exactly when you will receive your rebate. Alternatively, if you want to know why you haven’t received one or why it is less than you thought you could ask that here to.
At Green Apple Resources we offer the following bookkeeping services and tax planning:
- QuickBooks ProAdvising
- Customized Bookkeeping Solutions in QuickBooks
- Bookkeeping
- Tax Preparation
- Tax Consultation
- Financial Statment Preparation
- and more
Here’s to Green Apple Resources new blog and a long happy communication with our readers. I’m glad to meet you.
Kim
