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On-Target Tax Tips

FIRST-TIME HOMEBUYER'S TAX CREDIT

The first-time homebuyer credit applies to principal residences purchased before Dec. 1, 2009.

        Credit amount - The maximum amount of the credit is $8,000. For married individuals filing separately, the maximum credit is $4,000.

        "First-time homebuyer" - The taxpayer (and the taxpayer's spouse if married) must not have owned another principal residence in the three-year period before purchasing the new home.

        Credit is "refundable" - The credit is a refundable credit, which means that the taxpayer will receive the full credit as a refund even if there is no tax liability to offset.

        Credit recapture - If the taxpayer sells the home, or the home ceases to be used as the taxpayer's (or the taxpayer's spouse's) principal residence within 36 months of purchase, the taxpayer will have to repay the credit. The repayment will be due on the tax return for the year in which the home is sold or ceases to be used as the principal residence.

        Take the credit on last year's tax return - Taxpayers have the option of treating the purchase as made on December 31, 2008 and amending the 2008 Tax Return to take the credit now rather than waiting until filing the 2009 tax return in early 2010.

RESIDENTIAL ENERGY CREDITS

The recently enacted "American Recovery and Reinvestment Act of 2009" (the 2009 economic stimulus act) includes a package of tax incentives to encourage investments in renewable energy projects or more-efficient technologies. 

Energy-efficient existing homes. The new law extends the tax credit for improvements to energy-efficient existing homes through 2010. For 2009 and 2010, the amount of the tax credit is increased from 10% to 30% of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements during the tax year. The property-by-property dollar caps on the tax credit are also eliminated, and an aggregate $1,500 cap applies to all property qualifying for the credit.  Items that might qualify include the following:

        Insulation material or systems

        Exterior windows, skylights, or doors

        Metal or asphalt roofs

        Advanced main air circulating fan

        Qualified oil, propane, or natural gas furnace

        Qualified oil, propane, or natural gas hot water boiler

        Electric heat pump water heater

        Central air conditioner

        Biomass fuel stove

Residential energy property. The residential energy efficient property (REEP) credit is a tax credit equal to 30% of expenditures made during 2009 or 2010 on qualified solar water heating, geothermal heat pump, fuel cell, small wind energy, and solar electric property.  (Limits may apply on fuel cell property.)

When making one of the above purchases, you should ask the vendor whether your purchase is eligible for any of the federal income tax credits.

Do not hesitate to contact our firm if you have any questions about these tax credits.

On Target Tax Tips is an email communication of tax news, legal updates, and tax considerations intended to inform clients and colleagues of Shaub CPA Group about current tax issues and planning techniques.  You should consult with your CPA or tax advisor before implementing any ideas, comments or planning techniques. 


Shaub CPA Group
584 N. Emerson Avenue
Greenwood, Indiana 46143