| Here we are, another year older and we still have to | | | | June 30, 2010. The credit can be taken in 2009 or 2010 |
| deal with this income tax stuff. Some things just never | | | | with the ability to amend the 2008 return (if the |
| seem to change. | | | | purchase occurs in 2009). The same applies to |
| What seem to change are the tax laws we are | | | | purchases made in 2010 (the 2009 return can be |
| forced to deal with. We can now get a credit as a | | | | amended or have the transaction included in the return |
| first time home buyer for up to $8,000. The credit can | | | | prior to the original filing). |
| be taken on purchases made on or before April 30, | | | | Because our government has become so generous |
| 2010. If there is a signed contract by April 30, 2010, | | | | (taking my money to give to others), it seems likely |
| buyers can take up to June 30 of 2010 to settle. A | | | | that income tax rates will increase in 2010. If you are a |
| first time home buyer is any person not owning a | | | | business owner or will be due a large bonus, it makes |
| home during a three year period prior to purchasing a | | | | a great deal of sense to accelerate income into 2009. |
| principal residence. There is even the opportunity to | | | | The top bracket in 2009 is 35% but could be as high |
| settle in 2009 and amend the 2008 return to take the | | | | as 45% in 2010. It also makes sense not to prepay |
| credit. This might be done if the modified adjusted | | | | expenses as they will become more beneficial in 2010 |
| gross income limit (MAGI) is lower in 2008 allowing for | | | | when the rates are higher. |
| a larger credit to be taken (phase out of the credit | | | | An oldie but goodie continues to be getting reimbursed |
| occurs when MAGI exceeds $125,000 for single | | | | for those unreimbursed employee business expenses. |
| taxpayers and $225,000 for married taxpayers filing a | | | | If expenses are incurred that are typically deducted on |
| joint return). An amended 2008 return might also be | | | | form 2106 carrying to schedule A, guess who's likely in |
| filed if the MAGI limit does not make a difference and | | | | the alternative minimum tax? There is no benefit to be |
| it is just desirable to get the credit quicker. If the | | | | had so the best thing to do is to get reimbursed. In lieu |
| purchase takes place in 2010, then the credit can be | | | | of getting a commission or bonus that is due, submit an |
| taken on the 2009 return or the 2010 return. There is | | | | expense report to the employer and have the |
| even a move-up or repeat home buyer credit of | | | | payment be for expense reimbursement. This will pay |
| $6,500 if the home sold was a principal residence and | | | | the same money and will keep it out of gross income |
| lived in by the taxpayers for 5 consecutive years of | | | | (the W-2 form). It will even provide a benefit if there is |
| the eight years prior to the purchase date. There are | | | | alternative minimum tax to face. The employer will be |
| of course income limits that must be met in order to | | | | happy too. There is no payroll tax to be paid on the |
| take advantage of the credit (MAGI in excess of | | | | expense reimbursements. Reimbursement for auto |
| $125,000 for single taxpayers and $225,000 for | | | | mileage is best as this will give the employer a |
| married taxpayers filing a joint return causes the credit | | | | complete tax deduction. Reimbursements for meals |
| to phase out. In addition, the purchase price of the new | | | | and entertainment are limited to 50% as far as income |
| home cannot be greater than $800,000). This credit is | | | | tax deductions are concerned and the employer would |
| available for purchases occurring after November 6, | | | | be limited in income tax benefits. |
| 2009 and on or before April 30, 2010. If there is a | | | | As always, tax planning season sets up the filing |
| binding contract to purchase the new residence by | | | | season that will begin in just a few weeks. There |
| April 30, 2010, settlement can occur up to and including | | | | should never be any surprises. Begin the process now. |