Liberty Tax Addresses the Latest Tax Changes for Homeowners
What’s Changed for Claiming the First Time Home Buyer Credit?
(Virginia Beach, VA) The new first-time home buyer credit is not the only recent tax change to benefit those who own a home, according to Liberty Tax Service. There are also benefits this year for those homeowners who may have paid off their mortgage and can no longer itemize deductions. It’s now possible for these homeowners to deduct their real estate taxes. They can now deduct the lesser amount of real estate taxes paid during the year, or $500 for a single taxpayer ($1,000 for a married couple).
“Many are confused by the recent changes to the credit for first-time home buyers, said John Hewitt, CEO of Liberty Tax Service. “In 2008, Congress passed a new home buyer’s credit that functioned as an interest-free loan. Now, the repayment obligation is eliminated for taxpayers who purchased homes after January 1, 2009.”
The original measure provided a maximum credit of up to $7,500.00 ($3,750.00 for married filing separately), or 10 percent of the home purchase price for eligible first-time home buyers who purchased residences in 2008. Taxpayers can claim the credit for 2008 purchases by filing the new Form 5405 with their 2008 tax returns. The home must be the taxpayer’s main residence, and must be located in the United States. The District of Columbia first-time home buyer credit cannot be claimed in the year of the purchase or any prior year.
It is important that taxpayers who take advantage of this new credit plan understand that the credit is an interest-free loan that must be paid back over 15 years in 15 equal installment payments beginning the second year after the credit is claimed.
The recently signed stimulus package increased the maximum value of the credit to $8,000. The new law also stipulates that the requirement to payback of the credit will be removed if the homebuyer lives in the home for at least 3 years. It also removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1st, 2009 instead of the previous July 1 deadline.
If you bought a home in 2008, you may take an itemized deduction for “qualified mortgage insurance premiums” paid or accrued in 2008 as a result of home acquisition debt. The deductible amount is subject to a phase-out of 10% for taxpayers who are married filing jointly with an adjusted gross income of over $100,000 ($50,000 for taxpayers filing married filing separately).
There’s a change in the exclusion for home sellers. A home seller who is a single taxpayer has the opportunity to owe no tax on the first $250,000 of profit for the sale of a home owned and lived in for two of the last five years. A married couple owes no taxes on the first $500,000 of profit for the same time period. Beginning in 2008, a surviving spouse who sells a principal residence within two years of the date of death of the other spouse may exclude up to $500,000 of the gain if the ownership and use tests were met immediately before the date of death.
About Liberty Tax Service
Liberty Tax Service (www.libertytax.com) is the fastest growing retail tax preparation company in the industry’s history, with over 3,200 offices in the United States and Canada. The company plans to open up to 500 new offices in January 2010. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 6,000,000 individual income tax returns. With 40 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service (NYSE:JTX).
Liberty Tax Service (www.libertytax.com) provides computerized income tax preparation, electronic filing, refund loans, and online filing through eSmart Tax at www.esmarttax.com. Each office offers customers audit assistance, a money back guarantee, and free tax return checking. The Liberty Tax Service franchise opportunity has climbed to #3 on the latest Entrepreneur “Franchise 500.”