Now might be a good time to review the tax credits that are available for home purchases, move-ups, and remodeling projects. Note that a tax credit is a direct dollar-for-dollar reduction to your income tax bill, as opposed to a tax deduction, which merely reduces your taxable income.
The first-time home buyer $8,000 tax credit has been extended through April 30, 2010. (However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 still qualifies.) Keep in mind, “first-time” doesn’t really mean that you can’t have owned a house before. The IRS defines a first-time home buyer as someone who has not owned a principal residence during the 3-year period prior to the purchase. There are a few caveats on the tax credit:
For those who don’t qualify as “first-time” home buyers, a $6,500 credit for repeat or move-up buyers is available. You must have owned and lived in your current home for 5 consecutive years out of the last 8. All the other caveats above apply (except of course that the limit is $6,500).
For homeowners who want to remodel, the 2009 economic stimulus bill greatly upgraded the pre-existing tax credits for energy-efficient (“green“) home improvements on a principal residence, and extended them through the end of 2010. The tax credit was increased to 30% of qualifying expenses up to a maximum of $1,500. (However, the $1,500 applies to all improvements combined for the 2009-2010 period.)
Certain home improvements are considered to be so important that they are not subject to the the $1,500 limit. These include fuel cells, geothermal heat pumps, solar water heaters, solar panels, and wind energy systems. You can get a tax credit on 30% of the cost of these items, with no upper limit, for existing homes and new construction through 2016.
I’m not a tax advisor, so be sure to verify all of this before you launch into something!
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Kevin Contreras is the host and executive producer of Building Green TV on the PBS network. He is an old friend from our college days and has become quite prominent in the green construction movement. In his chapter of my e-book, he provides some fantastic tips on green remodeling, resulting in a home that costs less to operate, is healthier to live in, and has less impact on the environment. .jpg)
Mark MacKenzie runs a real estate brokerage and information firm in Phoenix, and he is the author of the Amazon.com #1 best-selling real estate book, Marketopoly, and he has another book due out soon called, It’s the Housing Market, Stupid! In his chapter of my e-book, he provides some great information on housing market trends, timing the market for maximum profit, buying low, selling high, etc. It’s a great read, especially for someone who is looking to be an investor in this difficult market.