Tuesday, August 25, 2009

You May Not Have To Pay Taxes on Forgiven Debt

People who have lost their homes through foreclosure (or short sales) or who have restructured their mortgage loans may qualify for tax relief under a new tax law, the Mortgage Forgiveness Debt Relief Act of 2007.

Highlights of Mortgage Debt Relief:
  • You may exclude up to $2 million of debt forgiven or canceled by a mortgage lender on a main home.
  • Both mortgage restrucuring and foreclosures qualify
  • Now available for the years 2007 through 2012.

Thursday, August 6, 2009

Get Your First-Time Home Buyer Tax Credit

If you are a First-Time Home Buyer and purchase a home before December 1, 2009 you can take advantage of the 2009 First-Time Home Buyer Tax Credit.

Here's what you have to do to get your benefit:

  • Close on your home purchase by November 30, 2009,
  • Ensure that you are a qualified first-time buyer under IRS guidelines,
  • Decide which year to file under, 2008 or 2009,
  • File an amended 2008 return or choose to apply the credit to your 2009 tax return.

Deciding When to Apply the Credit

If you want the benefits of your credit as soon as possible:
You might choose to file under your 2008 tax year. Since April 15 has already passed, you would have to file an amendment to your return. However, if you've already filed for an extension of your 2008 return, then you can simply claim the credit when you submit your return.

If you anticipate a drop in income next year:
You can wait to claim the credit as part of your 2009 filing. In some cases the value of the credit might be higher, particularly if in 2008 you qualify for only a partial credit because your income is over $75,000 (single) or $150,000 (joint).


Your Next Steps
Once you have determined which year to apply the tax credit, you will need to do two things to claim the credit:

  1. Fill out Form 5405 to determine the amount of your available credit, and
  2. File an amended return for your 2008 taxes, or wait and apply to credit when you file your 2009 tax return.