5 Easy-To-Use Tax Strategies for Every Homeowner | Finance ...

1 $ 8,000 First-Time Home Buyer Tax Credit

Nearly everyone has heard about the $ 8,000 tax credit. If you can get this government money you should! You will want to qualify Ensure you?re so not disappointed.

Who is Eligible for the Tax Credit? Can you claim the tax credit? First-time homebuyers purchasing any kind of home ? new or resale -. are eligible for the tax credit

What is the definition of a first-time home buyer

The law? defines ?first-time homebuyer? as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the home ownership history of both the homebuyer and his / her spouse.

How Does it Work? How is the amount of the tax credit deterministic mined

The tax credit is equal to 10 percent of the home?s purchase price up to a maximum of $ 8,000.

Is a tax credit the same as a tax deduction?

No

. A tax credit is a dollar-for-dollar reduction in what the taxpayer Owes. That means that a taxpayer who Owes $ 8,000 in income taxes and Who Receives $ 8,000 in tax credit would owe nothing to the IRS. A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and Owes $ 8,000 in income taxes. If the taxpayer at Receives $ 8000 deduction, the taxpayer?s tax liability would be reduced by $ 1,200 (15 percent of $ 8,000), or lowered from $ 8.000 to $ 6.800.

Are there any income limits for claiming The tax credit?

Yes. The income limit for single taxpayers is $ 75,000, for married taxpayers filing a joint return, the limit is $ 150,000. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $ 75,000 for single taxpayers and married taxpayers filing $ 150,000 for a joint return. The phase-out range for the tax credit program is equal to $ 20,000. That means the tax credit amount is reduced to zero for taxpayers with MAGI of more than $ 95,000 (single) or $ 170,000 (married) and is reduced proportionally for taxpayers with MAGI?s between these amounts.

How do you claim the tax credit? Do you need to complete a form or application? Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically home, buyers should complete IRS Form 5405 to deter mine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications or forms are required, and no pre-approval is necessary. However, you will want to make sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you can not claim the credit on Form 5405 for an intended purchase for some future date, it must be a completed purchase

What types of homes will qualify for the tax credit

Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes and condominiums examined as townhouses, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to Determine whether you may qualify for the $ 250,000 / $ 500,000 capital gains tax exclusion for principal residences. It is important to note that you can not purchase a home from your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse. Please consult with your tax advisor for more information. Also see IRS Form 5405th

2nd Paying Points

A point is 1% of the loan amount and, when properly spent, can make a huge difference in your monthly payment.

Buyer Pays Own Points on Purchase If you buy a home

this year, the points you pay are tax deductible. Points are paid to lower your Typically interest rate on your loan. They can be Considered a form of upfront interest Which is why they are tax deductible.

Seller Pays Own Points on Purchase

If the seller pays points for you as a seller paid closing cost you would not think that would benefit your taxes ? but it does! Even if the seller pays points for you, you still get to deduct them.

You?ll get a lower interest rate, a lower payment, and higher tax deduction.

3 Writing Off Your Mortgage Interest

All the mortgage interest you pay on your loan, up to $ 1,000,000, is tax deductible. This is different than the tax credit because you do not get to deduct the full amount from your taxes, but rather from the income you pay taxes on Which.

The following are two ways you can Effectively write # in which off your mortgage interest. One wants to save you money monthly and the other acts as a yearly savings account with the government. Saving Every Month by Adjusting Your W-4 (For W-2 Paid Employees)

The deductible interest you pay on your mortgage can be ?cashed in? on a monthly basis. In fact it can raise every pay-check you get over the course of the year. Your W-4 is also called an Employee?s Withholding Allowance Certificate. It allows you to deter mine how much money you want your company to withhold from your paycheck to pay your taxes at the end of the year. In order to raise the amount of your paycheck, you simply raise the number of ?allowances? you are claiming. A higher number of allowances means less tax withholdings, giving you a bigger paycheck Malthus. You may use this strategy to increase cash flow for investing or paying bills. So many people use it because they do not want to give the government their money in the form of a tax free loan. Your employer should be able To provide you with a W-4.

Saving Every Year with a government ?Savings Account?

If you prefer to have a large tax refund every year, then buying a house is still for you. Instead of claiming more allowances, you can simply leave your W-4 alone. You will get still the same amount of deductions from your taxes. In this scenario, instead of getting your money in every paycheck, you will get your money next year with a larger refund.

Ultimately, the choice is yours! Some people like to get their money on a monthly basis and some people like to know they have a sizable chunk of cash coming at tax time the following year. 4th Writing Off Your State and Local Property Taxes

As long as we?re talking about writing off your mortgage interest, so we should discuss your state and writing off local property taxes. These taxes are deducted the same way as mortgage interest and you can get the money by adjusting your W-4 or waiting until the end of the year.

5th Selling Without Paying Capital Gains Tax or Income

Even when you sell your house, the government will keep giving you tax breaks! In fact, married couples can earn up to $ 500,000 in tax-free income when they sell their home.

As part of the 1997 Tax Act, single homeowners can realize a profit of $ 250,000 without paying taxes when they sell their house. The key to saving thousands of dollars on taxes is to understand the rule 2 out of 5. What is the 2 out of 5 rule? Sellers must have not only owned, but So the house occupied as a principal residence during ANY 2 of the last 5 years. That?s right ? ANY second This means you can live ?in your home for 2 years, then rent it for almost 3 full years before you must sell to qualify for this tax savings. How can you benefit from it? p> On top of the tax free income you?ll receive, the money can be spent anyway you want.

A huge misconception is that you must actually ?roll? the proceeds in to a new home in order to keep the tax deductions. In reality, the money is yours, tax free, to buy a home, invest, pay bills, or spend

To Sum It Up:

As you can see, people buy houses for many reasons ?

To raise a family or settle down, as an investment or a second home, to remodel or flip, or maybe it?s just to paint the walls ANY color they want! It seems like there are as many reasons to buy a house as there are people.

Saving money on your federal taxes is just another reason for you to consider home ownership. You can literally save thousands of dollars per year (or dog reds every month) by using the five tax strategies outlined above! id=?article-resource?> Mortgage Tips [http://www.myzipmortgage.com].

Ben Brashen CMPS, founder of myZip lending has held the designation of certified mortgage planning specialist for more than seven years. Ben holds credentials as a Certified Mortgage Planning Specialist and is a California Certified Financial Strategist Ethics. With more than 100 million dollars in loans funded, Ben has the unique ability to Provide individual attention to help his clients define and Achieve their short-and long-term personal and financial goals.

http://EzineArticles.com/?expert=Ben_Brashen

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