Last Updated Mar 16, 2010 4:14 PM EDT
I hate taxes. As a freelancer with two careers and an investment property -- that's two separate Schedule C and a Schedule E tax form -- I often look enviously over at my husband's one W-2 and small stack of receipts and contemplate stabbing him.
However, I have learned over time that the best tax deductions to pursue are the biggest -- grab the dollars and let the dimes slide. That's why I like the first-time homebuyer tax credit -- which provides up to $8,000, and which you may be eligible for if you bought a home last year in 2009, or even now, if you want to get into contract for a home by April 30th.
That's one of the beauties of this credit -- if you leap into action and buy right now, you could still claim that early 2010 purchase on your 2009 taxes. "If you've already filed that return, you can amend it," notes Mitchell Gusler, a C.P.A. in Bardonia, N.Y., with Rifkin and Company LLP.
What's more, you may not even need to be a first-timer. Since the credit is complicated, let's look at it in three parts:
First-time homebuyers who bought before November 2009If you bought a home before November 7, 2009, you can claim the entire credit if you were a single filer making up to $75,000, with $75,000-$95,000 being a phase-out zone where you would be eligible for part of the credit.
If you're filing jointly, you could make up to $150,000, with $150,000-$170,000 being a phase-out zone where you would be eligible for part of the credit.
What do we mean by "making"? When the IRS is considering whether you're eligible for the credit, they don't look at your salary, but rather your AGI -- the Adjusted Gross Income on your tax return, which is usually a little lower.
First-time homebuyers who bought after November 2009After November 7, 2009, the income limits for the credit were expanded, Gusler notes. For single tax filers they jumped to $125,000, with $125,000-$145,000 being a phase-out zone, and for joint tax filers they jumped to $225,000, with $225,000-$245,000 being a phase-out zone.
Trade-up buyers who bought after November 2009After November 7, 2009, you're also eligible for a slightly smaller credit of up to $6,500 if you're trading up -- which means you must have been a resident of your old home for at least five of the last eight years and be able to prove it (think utility bills and real estate tax bills), sell the home and provide proof of sale (a HUD-1 form from your closing is the right piece of paper) and then buy your new home, and attach the documentation to a paper, not electronic, return.
General infoNotice how above I said the credit was for "up to $8,000"? The credit for first-time homebuyers is actually for 10 percent of the purchase price of your house, up to $8,000.
Note that all the above credits are available only to those who are eighteen and older -- a response to the fact that when the credit was first unveiled it was taken by children as young as four.
Also, the credit, like an IRA contribution, is something that you can act now to grab to help last year's taxes. So do you want to run right out and buy a house? Not necessarily, Gusler says. "If you're buying just to buy, you can get into a lot of trouble if you can't afford to carry the house."
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