Another financially filled guest post from financial expert Ann Stone.
Photo Courtesy of: acspotlight
Let's talk about the good stuff… if there is any with the IRS. Tax credits are money that you receive as a bonus when you qualify.
First-Time Homebuyer Credit
You don't have to be married to get this one but the double incomes might help qualify you to purchase a home. If neither one of you have owned a principal residence during the past three years and you purchase a home this year before Dec. 1 you can receive a credit of up to $8,000 on either an original or amended 2008 tax return, or a 2009 return. But the purchase must close before Dec. 1, 2009, and an eligible taxpayer cannot claim the credit until after the closing date on the house. This credit phases out at higher income levels, and different rules apply to home purchases made in 2008.
Advice: If one of you has a bad credit history, be sure to check before heading to the bank, then a purchase before the marriage might be a better idea. Use this site to receive a free credit report from each of the three leading credit bureaus once a year. If you need to check more often or you want to know your credit score then there will be a charge. Clean up any errors on the report before approaching the bank for a loan.
First-time homebuyers may be able to take advantage of a tax credit for homes purchased in 2008 or 2009. The credit:
· Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.
· Applies only to homes used as a taxpayer's principal residence.
· Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
· Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
The credit is claimed using Form 5405.
For 2008 Home Purchases:
The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.
For 2009 Home Purchases:
The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1.
For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.
First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has more information on these options.
Energy-Efficient Home Improvements
The Recovery Act also encourages homeowners to make their homes more energy efficient. The credit for non-business energy property is increased for homeowners who make qualified energy-efficient improvements to existing homes. The law increases the rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to a total of $1,500 for improvements placed in service in 2009 and 2010. Qualifying improvements include the addition of insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
Get specific requirements at: http://www.irs.gov/newsroom/article/0,,id=206869,00.html.
Tax Credit for First Four Years of College
The American opportunity credit is designed to help parents and students pay part of the cost of the first four years of college. The new credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. Tuition, related fees, books and other required course materials generally qualify. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.
Get all the particulars at: http://www.irs.gov/publications/p970/index.html.
Certain Computer Technology Purchases Allowed for 529 Plans
ARRA adds computer technology to the list of college expenses (tuition, books, etc.) that can be paid for by a qualified tuition program (QTP), commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services to be used by the designated beneficiary of the QTP while enrolled at an eligible educational institution. Software designed for sports, games or hobbies does not qualify, unless it is predominantly educational in nature.