A Batch of New Tax Breaks on Your Home
By JAN M. ROSEN
Published: February 7, 2009
HOME is not only where the heart is. Increasingly, it is also where the tax breaks are, and not just the all-important deductions for mortgage interest and real estate taxes. Recent provisions offer breaks for home sales and purchases, for example.
Of course, these provisions are but a few aspects of the nation’s complex and ever-changing tax code. There are many other possibilities for saving on taxes — or for being tripped up.
The new first-time homebuyer credit can reduce a couple’s taxes for 2008 or 2009 by up to $7,500, or a single filer’s by up to $3,750. Actually, the name is a bit of a misnomer. A “first-time homebuyer” is a person or couple who had no ownership interest in a principal residence in the United States during the three years ended on the purchase date of the residence for which the credit is claimed. Thus, someone who formerly owned a home, then rented for several years, could qualify. The purchase must be on or after April 9, 2008, and before July 1, 2009.
Homebuyers who qualify are allowed a one-time credit of 10 percent of the purchase price, up to the $7,500 or $3,750 limit, against their income tax for the year of purchase. Although it is termed a refundable tax credit in a 2008 law, it is essentially an interest-free loan that must be repaid in equal amounts over 15 years, starting the year after the credit is claimed. The credit is available to joint filers with modified adjusted gross income below $150,000; it phases out once income exceeds $170,000. For single filers, the numbers are $75,000 and $95,000.
“I think it’s a good deal,” said Barbara Weltman, a tax lawyer in Millwood, N.Y., who is also a contributing editor of “J. K. Lasser’s Your Income Tax 2009,” (Wiley, $18.95). “My daughter bought a home in October,” she said, and will benefit from the credit. And one proposal for tax legislation now being discussed in Congress is to eliminate the repayment requirement, making it an even better deal.
Widows and widowers who sold homes last year may also get a new tax break. Previously, couples were generally entitled to exclude gains of up to $500,000 when they sold a principal residence in which they had lived two of the previous five years, but for single filers the exclusion was limited to $250,000. Effective in 2008, a surviving spouse may exclude up to $500,000 if the sale occurs within two years of the other spouse’s death.
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http://www.nytimes.com/2009/02/08/business/yourtaxes/08tips.html?em
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