Wow! Who would have suspected that a refundable $8,000 tax credit would be an invitation for un-deserving people to cheat? Of course, the answer is that our imbecile rulers in DC obviously weren’t able to anticipate what anybody with half a brain could see would be an inevitable result of such a program. Common Sense has to be the scarcest commodity in all of DC.
And the response from our rulers to this? The sub-head of this article sums it up:
Lawmakers consider extension.
Typical problem solving by our moronic leaders. When a government program is filled with fraud and corruption, just make the program even bigger and more costly and available for more people to scam.
Is anyone else in favor of a constitutional amendment to change the eligibility requirements for our elected officials to include an IQ above 50? That would wipe out most of the current ruling class right off the bat.
First-Time Homebuyer Credit
I just closed escrow on the purchase of my first ever house in July 2009. Is my Realtor correct that I can file an amended 2008 tax return to claim the special credit for first time homebuyers? Is he also correct that this credit is mine to keep forever and doesn’t need to be repaid? I had read somewhere that the credit was just an interest free loan that had to be repaid on future tax returns. It sounds too good to be true.
Your Realtor is correct that you won’t have to wait until April 15, 2010 to receive this credit, which can be as much as $8,000. You have the option to claim the credit on your original or amended 2008 1040, as long as the purchase has been completed.
As always, this kind of thing should be handled by a professional tax preparer, whose software should have the ability to properly calculate the credit on Form 5405. This can get tricky if your modified Adjusted Gross Income is over $75,000 ($150,000 for married couples) because that places you into the dreaded “Evil Rich” category as defined by our imperial rulers in DC.
In regard to repaying the credit, there was a change in the original program from what we had in 2008. For homes purchased in 2008, the credit must be repaid in 15 annual installments, starting with the 2010 1040. If the home ceases to be the main residence before the 15 year repayment tine is up, the remaining amount of the credit will be due in one lump sum on that year’s 1040.
For homes purchased between January 1, 2009 and December 1, 2009 (the current end of the credit qualification period), the credit does not have to ever be repaid if you use the home as your primary residence for at least three years. If you move out of the home, sell it or convert it to business or rental usage before the three year anniversary of your purchase, you will be required to repay the full amount of the credit in one lump sum on the tax return for the year in which the home ceased to be your principal residence.
If you don’t already have your own professional tax preparer, be careful of who you use to prepare the amended 1040. As IRS has announced in this press release, they have discovered some unscrupulous preparers who are soliciting clients who don’t actually qualify for the credit. If you happen to use one of those preparers, your credit will be disallowed and your full tax return will most likely be audited by IRS.
As with any tax law, there are even more twists to this one; so be sure to work with a professional tax advisor.
Good luck. I hope this helps.
Refundable Tax Credits
hey i was looking at your tax website and have a quick question...
hopefully you can give me a non-committal answer without alot of research.
have you ever heard of a situation where someone with no income can qualify for a tx refund, even though theyve paid nothing in?
for example an unwed mother living with her parents: she hasn't worked, yet wouldnt she qualify for some type of credits taking care of a newborn? and if so, those credits applied to her tax liability, but no actual liability as there was no income, does that soemhow turn into a credit & subsequent refund?
any suggestions would be appreciated, even if its just steering us where to research further. Again, not looking for legal tax advice, I've just never heard of someone getting a tax refund without paying any taxes in through the year.
While you are correct that most tax credits are non-refundable, meaning they can zero out the taxes, but not create an actual refund to tax return filers, there are an increasing number of actual refundable credits that allow people to receive money even if they hadn't paid anything in. The largest is the Earned Income Credit (EIC), often generating refunds of thousands of dollars in "free" money for the filers.
If our new President gets his way, there will be even more of those kind of credits, which some people are calling welfare.
Most of these credits don't apply to people who are being claimed s dependents on someone else's return, so your friend probably wouldn't qualify for a refund if her parents are showing her and/or her child as dependents. However, it wouldn't hurt to have a professional tax advisor look at her particular situation to see if filing a 1040 makes sense.
I hope this helps.
The new tax law changes
As always, our rulers in DC have screwed up any attempt at tax simplification with yet another new law changing the rules of the game.
Here are some highlights of the new tax related changes courtesy of one of my favorite reference sources, TaxCoach Software:
On Wednesday, July 30, President Bush signed the "Housing and Economic Recovery Act of 2008." While the bill focuses on protecting lenders and preventing foreclosures, there are three other tax provisions worth noting.
1. The 2008 Housing Act gives “first-time homebuyers” (those who have not owned a primary residence for three years) a tax “credit” equal to 10% of the new home’s purchase price, up to $7,500 ($3,750 for married couples filing separately). This “credit” is available for purchases from April 9, 2008 through June 30, 2009. But, if you take the credit, you have to pay it back, in equal installments, over the next 15 years. So it’s really just an interest-free loan, not a true tax credit. It phases out for incomes between $75,000 and $95,000 ($150,000 and $170,000 for joint filers).
2. The law creates a temporary deduction, for 2008 only, for property taxes for non-itemizers. The deduction is limited to $500 ($1,000 for married couples filing jointly).
3. The law eliminates tax breaks on the sale of your principal residence for periods you don't use it as your principal residence. Under old law, you could take a rental property or vacation home, use it for at least two years as your primary residence (five years if you acquired it in a Section 1031 exchange), then sell it and exclude up to $250,000 of gain from your income ($500,000 for married couples filing jointly). This held true even if most of the gain occurred while you were renting the property or using it as a vacation home. The new law taxes you on any gain after 2008 attributable to periods you don't use it as your primary residence. (There’s no need to appraise the property to determine interim value; the new law determines excluded appreciation on a pro-rata basis, according to how long you own it.)
Telephone Tax Credit
The form to claim this refund is very intimidating, with all of its lines and the need to have phone bill info going back into 2003. I have found that this has been another big benefit of having everything on QuickBooks and keeping multiple years running in the same file. When preparing tax returns, clients who didn't use QuickBooks have had to settle for the tiny standard amounts of $30 to $60. For those with their data in QB, going back at least into 2003, I have been able to fill in all of the necessary data in Lacerte in about 12 minutes and the credits have been averaging several hundred dollars.