First-Time Homebuyer Credit

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.

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 a 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.

Seven Facts about the New Sales Tax Deduction for Vehicle Purchases

Taxpayers who buy a new car or several other types of motor vehicles this year may be entitled to a special tax deduction when they file their 2009 federal tax returns next year. The tax break is part of the American Recovery and Reinvestment Act of 2009.

Here are seven things you should know about this new deduction:

1. State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible.

2. Qualified motor vehicles generally include new (not used) cars, light trucks, motor homes and motorcycles.

3. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.

4. This deduction can be taken regardless of whether or not you itemize other deductions on your tax return.

5. Taxpayers will claim this deduction when filing their 2009 federal income tax return next year.

6. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

7. The deduction may not be taken on 2008 tax returns.

Unemployment Benefits Tax Free for 2009

Every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 when they file their tax return next year. For a married couple, the exclusion applies to each spouse separately. Unemployment benefits your clients received in 2008 and prior years remain fully taxable.

Ten Tips for Deducting Charitable Contributions

When preparing to file your federal tax return, don’t forget your contributions to charitable organizations. Your donations could add up to a sizeable tax deduction if you itemize on IRS Form 1040, Schedule A.

Here are a few tips to ensure your contributions pay off on your tax return:

1. Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.

2. You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance.

3. If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.

4. Donations of stock or other property are usually valued at the fair market value of the property. Special rules apply to donation of vehicles.

5. Clothing and household items donated must generally be in good used condition or better to be deductible.

6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution.

7. To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document from the organization may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.

8. If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return.

9. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.

10. Contributions made for relief efforts in a Midwest disaster area receive special benefits. For more information, see Publication 4492-B, Information for Affected Taxpayers in the Midwest Disaster Areas.

Seven Things you Should Know When Selling Your Home

People who sell their home may be able to exclude the gain from their income. Here are seven things every homeowner should know if they sold, or plan to sell their house:

1. Amount of exclusion. When you have gain from the sale of your home, you may be able to exclude up to $250,000 of the gain from your income. For most taxpayers filing a joint return, the exclusion amount is $500,000.

2. Ownership test. To claim the exclusion you must have owned the home for at least two years during the five year period ending on the date of the sale.

3. Use test. You also must have lived in the house and used it as your main home for at least two years during the five year period ending on the date of the sale.

4. When not to report. If you are able to exclude all of the gain from the sale of your home, you do not need to report the sale on your federal income tax return.

5. Reporting taxable gain. If you have gain which cannot be excluded, it is taxable and must be reported on your tax return using Schedule D.

6. Deducting a loss. You cannot deduct a loss from the sale of your home.

7. Rules for multiple homes. If you have more than one home, you may only exclude gain from the sale of your main home and must pay tax on the gain resulting from the sale of any other home. Your main home is generally the one you live in most of the time.

Guide to Proving Your Deductions

If you have a small business, you should soon be receiving a guide in the mail from our office on how to make sure you can prove your business deductions. The IRS is accelerating its audit and collection activities, and we want to make sure you're **bulletproof** in case your return is ever targeted. The federal government is going to need more and more money to pay for all these RIDICULOUS bailouts, so read this guide and put on your vest! (If for some reason you don't receive your guide, call and ask for a copy. We'll be happy to email you another.)

Merry Christmas and Happy New Year!

Merry Christmas and Happy New Year! Henry and I have had a wonderful time celebrating Christmas with both our families, and we're looking forward to spending a little time with some friends before the new year gets here and our lives get totally crazy again. We both hope you've had a wonderful time celebrating with your family, too, and we wish you a blessed new year.