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Money Girl
113 MG New New Homebuyer Tax Break
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Bill credits end if you pay off devices early. ctmobile.com Hello and welcome to Money Girl's Quick and Dirty Tips for a richer life. I'm your host, Laura Adams. In this episode, I'll discuss the new and improved tax credit that's available for home buyers. In Show 110, I discussed the new home buyer tax credit. I mentioned that some changes to this benefit might be coming soon due to proposed legislation. Well, the IRS just announced that they have expanded this tax break for 2009 purchases to incorporate provisions from the American Recovery and Investment Act that was recently signed into law. Let's review the credits so you're fully up to speed on the differences. The new and improved tax credit is only for home purchases completed from January 1st to December 1st of 2009. The old credit that I discussed in Show 110 now applies to purchases completed from April 9th through December 31st of 2008. To be considered a first-timer for the purposes of either the 2008 or 2009 tax credit, you must not have owned a home for three years prior to your purchase. For example, let's say you bought a primary residence on January 10th of 2009. If you and your spouse, if you're married, didn't own a home after January 10th of 2006. Congratulations, you can consider yourself a first-time home buyer once again. However, the credit amount you'll receive is reduced if your adjusted gross income is more than $75,000 or $150,000 if you're married filing jointly. You're not eligible for the credit at all if your adjusted income exceeds $95,000 or $170,000 for joint filers. Qualifying taxpayers who purchase a home from January 1st to December 1st of 2009 can claim 10% of the purchase price up to $8,000 or $4,000 for those married and filing separately. This is $500 more than the credit amount for qualifying purchases in 2008. The new credit isn't as large as many had hoped it would be, but its terms make it a substantial improvement. This is because the new 2009 credit is a real credit. The 8 grand is money that will be refunded to you or used to offset any taxes you owe with no strings attached as long as you stay in the home for three years. The 2008 credit is 10% of the purchase price up to $7,500, but unfortunately it must be repaid to the government over a 15-year period just like an interest-free loan. Be sure to go back and listen to Show 110 for more details if your qualifying new home purchase was in 2008. If your qualifying purchase is in 2009, you have the option to take the credit on either your 2008 or your 2009 tax return. So if you already completed a home purchase this year and have time to include it on your return that's due on April 15th, that's great. But don't worry if you can't, simply include the credit on your 2009 return that's due next year. Another option is to file an extension on your 2008 return. This doesn't give you more time to pay a tax liability. It simply gives you an extra six months to file your return. You'll owe interest on any past due amounts and even penalties for late payments. However, this may be the best strategy to get tax credit funds sooner rather than later if you have an upcoming home purchase that will qualify. Take a look at IRS Form 4868, the extension application, for more details. And speaking of tax forms, the IRS published a revised version of Form 5405 to address the new home buyer credit. This form must be filed with your federal tax return to claim the credit. The instructions on this form include information on who can and who cannot claim the credit as well as situations where the credit would have to be repaid. You'll find links to these documents in the show transcript at moneygirl.quickendertietips.com I'm glad you're listening. Send your email to money@quickendertietips.com Chaching. That's all for now. Courtesy of MoneyGirl, your guide to a richer life. Yet MoneyGirl and other great shows from Quick and Dirty Tips stream to your iPhone. Download Stitcher free today at Stitcher.com With the Wells Fargo Active Cash Credit Card, you can earn unlimited 2% cash rewards on purchases you want and purchases you need. That means you earn 2% cash rewards on what you want, like season tickets to watch your favorite team and 2% cash rewards on what you need, like paying for parking. That's the beauty of the Active Cash Credit Card. It's ready when you are, with unlimited 2% cash rewards. The Wells Fargo Active Cash Credit Card, that's real life ready. Terms apply. Learn more at Wells Fargo.com/activecash. When you need meal time inspiration, it's worth shopping king supers. For thousands of appetizing ingredients that inspire countless mouth-watering meals. 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