RIVERWOODS, Ill., March 16 /PRNewswire/ --There are many tax advantages connected with owning a home according to CCH, a Wolters Kluwer business and a leading provider of tax, accounting and audit information, software and services (CCHGroup.com). Here are the main features of a dozen different ways homeowners can benefit:
- A refundable "first time homebuyers' credit" of 10 percent of the purchase price of a new home – capped at $8,000 – is available for homes purchased between January 1, 2008 and before July 1, 2010. The purchasers must enter into a binding agreement to purchase before May 1, 2010, and must not have had an "ownership interest" in a principal residence during the three years before the purchase. For purchases on or after November 6, 2009, purchasers must be at least 18 years old and homes must have a purchase price under $800,000.
- A refundable "repeat homebuyers' credit" is available for taxpayers who purchase a new home on or after November 6, 2009, and who have lived in a previous home for five consecutive years out of the last eight. The credit is 10-percent of the purchase price, but capped at $6,500. The buyers must enter a contract to buy the home no later than April 30, 2010, and must close on the sale before July 1, 2010. Purchasers must be at least 18 years old and homes must have a purchase price under $800,000.
- Homeowners can exclude up to $250,000 of gain on the sale of their homes (up to $500,000 for joint filers) if they have owned and lived in the home for two out of the five years prior to the sale. The periods of ownership and occupancy do not have to be identical.
- Homeowners can take the interest on their mortgage indebtedness of up to $1 million as an itemized deduction. The interest can be on their principal residence and one additional residence.
- For ordinary income purposes, up to $100,000 in home-equity loan interest can also be deducted. For purposes of the alternative minimum tax (AMT), interest on home equity loans is deductible only if the loan is used to acquire, build or "substantially improve" a home.
- For 2009 and through 2010, mortgage insurance premiums also are deductible as mortgage interest. However, the mortgage insurance had to be originally acquired on or after January 1, 2007.
- Homeowners can also take their state and local property taxes as an itemized deduction.
- Non-itemizing homeowners can take their state and local property taxes as an additional standard deduction up to $500 ($1,000 for joint filers) on their 2009 returns.
- If a homeowner's mortgage debt of up to $2 million on their principal residence is forgiven, as in a write-down or foreclosure, it is not treated as "cancellation of debt income." This special relief is temporary and is available for six years, retroactively for discharges after January 1, 2007 through December 31, 2011.
- Homeowners who install certain energy-efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters can receive a 30-percent tax credit in both 2009 and 2010, but there is a lifetime limit of $1,500 on the credit.
- A separate 30-percent credit is available to homeowners who install alternative energy equipment such as fuel cells, solar water heaters, solar electric equipment, small wind energy property and geothermal heat pumps.
- Low-income homeowners who hold mortgage credit certificates from state or local governments can claim a tax credit. Relatively few people qualify – only about 35,000 in 2007 – but the average credit that year was over $1,000.
These are just the highlights of these tax breaks. Homeowners who think they are eligible should consult a tax professional and/or use resources such as tax preparation software, IRS Publication 17: Your Federal Income Tax and irs.gov.
About CCH, a Wolters Kluwer business
CCH, a Wolters Kluwer business (CCHGroup.com) is a leading provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. CCH is based in Riverwoods, Ill. Wolters Kluwer is a leading global information services and publishing company. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands (www.wolterskluwer.com).
SOURCE CCH, a Wolters Kluwer business