7 Housing Tax Laws You Need to Know!2. First-home buyer credit
Washington took two stabs at a tax break for buyers of a first home.
In
July 2008, the Housing and Economic Recovery Act created the First-Time
Homebuyer Credit. Although called a credit, the $7,500 tax break, or 10
percent of the property's purchase price (whichever is less), must be
repaid. Lawmakers, however, passed the measure hoping that it would
help some buyers get into their first homes.
This
first-home tax break originally applied to first homes bought between
April 9, 2008, and June 30, 2009. However, when a second measure, the
American Recovery and Reinvestment Act of 2009, became law on Feb. 17,
the first-time homebuyer credit became a true credit.
Now purchasers of a first home between Jan. 1 and Nov. 30 of this
year can get an actual tax credit that reduces their tax bills dollar
for dollar. In addition, the credit amount for qualifying 2009 home
purchases is increased to $8,000.
Homebuyers
also have a choice of when to claim the 2009 credit. The $8,000 amount
can be taken on 2009 tax returns that are due next year or, if it makes
more tax sense, the new homeowner can claim the credit on his or her
2008 return this year.
There are income
limits on both the 2008 and 2009 versions of the first-home buyer
credit. And if you bought your first residence on or after April 9 but
by Dec. 31 of last year, you must claim the earlier $7,500 amount and
eventually pay it back.
3. PMI deduction
Typically, if your home down payment is less than 20 percent, your
lender will require you to buy private mortgage insurance, or PMI. This
policy protects the lender if you default, but you must pay the
premiums, usually as part of your monthly mortgage payment.
However,
on certain home loans issued since 2007, these premium payments have
been deductible as an itemized expense. This tax break is in effect for
eligible new home loans issued through the 2010 tax year.
The
Form 1098 or similar year-end statement you get from your lender should
show the amount of PMI premiums you paid during the tax year. Enter
that figure in the "Interest You Paid" section (line 13) of your
Schedule A.
The amount of PMI you may
deduct is limited if your adjusted gross income is more than $100,000
($50,000 if married filing separately). You'll get no deduction if your
adjusted gross income is more than $109,000 ($54,500 if married filing
separately). A work sheet on page A7 of the Schedule A instruction book, or your tax software, will help you calculate your exact PMI deduction amount.
Posted: April 2, 2009 Page | 1 | 2 | 3 | 4 |