Six Little-Known Tax Tips for Home Buyers
HousingWatch talked to four experts about some of the tax laws and rules related to home purchases that you don't hear that much about. If you (or someone you know) have recently purchased a home or are thinking of doing so this tax season, you're going to want to read (or share) these tips!
Paper returns for first-time homebuyers: You need to be sure to file a paper return if you plan to take the home buyer tax credit – electronic returns are not eligible.
Buying from some relatives don't count. Home purchases from relatives of the taxpayer or the taxpayer's spouse do not qualify for the tax credit if that relative meets the IRS definition. The IRS defines relatives as ancestors (parent, grandparent, etc.) and lineal descendants (child, grandchildren, etc.) and spouses. This also means you can't purchase from your sibling nor your parents-in-law. However, it seems you can buy a home from an aunt, uncle, niece or nephew.
Moving Expenses: You can deduct moving expenses if you've made a move in 2009 of more than 50 miles for work. That includes up to 24 cents per mile driven for moving purposes, says Victoria Purcell, Tax Manager at BDO in Boston. There is no difference whether you moved before you found a new job vs. if you had an offer in hand when you trekked to your new location, so long as you meet the distance and time requirements relative to the new job. "An employee can take deductions for moving expenses on Schedule A as miscellaneous itemized deductions," Purcell told HousingWatch. "A self-employed individual would be allowed to fully deduct any moving expenses related to his trade or business expenses on Schedule C."
Previous homeowners: If you have owned a home for five consecutive years in the last eight, and are buying a new home – you may qualify for a $6,500 tax credit, says Jenny Realo, a CPA and executive vice president of CareOne Debt Relief Services. But that all depends upon three things: Your income, the home's purchase price and when you purchase. The home price must be under $800,000 and purchased after Nov. 6, but before May 1. So if you're a big spender, when bargaining with the sellers, it is definitely in your advantage to come in at $799,999, provided that you also make less $125,000 a year, or $225,000 for married couples filing jointly.
Vacation properties. If you group-purchase and then rent out a vacation home, or have a time share, you can deduct the property taxes if the amount being paid toward the real estate property tax is listed separately on your bill of annual owner dues, says tax advisor Gary Price of Sensiba San Filippo.
You as builder: If you acted as your own developer to build an energy-efficient residence, you can get a $2,000 tax break under the Energy Efficient Home Credit, says Robert Dietz from the National Association of Home Builders. If you own the land and the materials being used to build a home and then hire a third party contractor (a builder) to construct the home, such as in a custom home situation, then you can claim the credit as the home's developer. But note, he says, you can't then reside in the home yourself. You must sell or lease the home to someone else after construction. See IRS Notice 2008-35 and download Form 8908.
Find more tax tips at the NAHB's special website about the homebuyer tax credit.
See also "Top Five Highest and Lowest Property Tax States" on AOL Real Estate.
Sheree R. Curry is an award-winning business journalist who lives in a Minneapolis suburb.