Thursday, June 11, 2009

Get The Most Out of Your Homebuying Tax Credit recently posted a helpful article on how new homebuyers can get he most out of their home buying tax credit. You can find a segment of their article below, or check out the full story here.

When it comes to the $8,000 tax credit for first-time homebuyers, it seems there's a new program every week to help tap that money today.

The credit can be claimed on 2008 or 2009 tax returns. Homebuyers who get a loan backed by the Federal Housing Administration can use the money to cover closing costs and other fees, and at least 10 states offer ways to use the tax credit faster.

"There are some real neat tax planning strategies you can apply now," said Bob Meighan, vice president of TurboTax.

To be eligible, a buyer cannot have owned a home in the past three years. So if you're ready to buy, here are some tips:

INCOME CONSIDERATIONS: The tax credit, for home purchases made through end of November, comes with income thresholds, $75,000 for individuals and $150,000 for joint filers. After those limits, the credit begins to phase out. If you bought a home this year and expect your 2008 income to be lower than next year's, it makes sense to file for the credit this year using a 2008 amended return.

However, if you think your income will decrease, due to job loss, wage cuts or hour reductions, it makes more sense to file for the tax credit on your 2009 tax returns to get the most out of the credit, Meighan said.

TAX WITHHOLDING: Another benefit to waiting until 2009: You can increase your take-home pay. By taking the credit next year, you can change your tax withholding status with your employer now and get more on a paycheck-to-paycheck basis, Meighan said.

You'll be giving up a "fatter" tax refund next year, but each month you'll have more change in your pocket.

Also, don't forget to reduce your federal and state tax withholding to account for the tax deduction you can take on the mortgage interest and property taxes you pay.

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