Posts Tagged ‘ IRS ’

Pay Your Mortgage Early, Boost Your 2011 Federal Income Tax Deductions

December 26, 2011
By

Increase your 2011 tax deductionsTime is running out to boost to your 2011 federal tax refund. All you have to do is make your January 2012 mortgage payment while it’s still December.

It’s a simple tax strategy that works because of how mortgage interest is paid, and of how the U.S. tax code is written.

Different from rent which is paid for the month ahead (i.e. “you’re paying January’s rent”), mortgage payments are made only after mortgage interest has accrued (i.e. “you’re paying for money you’ve already borrowed from the bank”).

This is called “paying interest in arrears” and U.S. tax code states that the mortgage interest is tax-deductible in its year paid, subject to limitations.

By making the January 2012 mortgage payment in December 2011, therefore, homeowners who itemize their on their tax returns can apply their January mortgage payment’s interest portion to their 2011′s tax returns.

The alternative is to pay the mortgage on schedule, and wait for April 15, 2013 to claim the credit.

If you choose to pre-pay your mortgage and typically send your payment via USPS, give your check ample time to be delivered to your lender, and processed. Mail your check no later than Saturday, December 24.

For Olympia homeowners that pay electronically, the process is simpler. Edit your online bill pay program to have your mortgage payment post no later than Thursday, December 29.

Make note, however. Not all mortgage interest is eligible for tax-deductibility, and not all homeowners throughout the state of Washington State who pay mortgage interest should itemize said interest on their tax returns.

Before prepaying on your mortgage, ask your tax professional for advice.

Military Members : You Have 3 Weeks To Buy A Home, Claim Up To $8,000 In Tax Credits

April 8, 2011
By

Military tax credit expirationIf you’re an eligible federal employee or qualified military personnel, you have 3 weeks from this Saturday to use the federal home buyer tax credit, and to claim up to $8,000 in federal income tax credits. 

According to the IRS, eligible persons include members and spouses of the uniformed services, members and spouses of the Foreign Service, and intelligence community employees who served at least 90 days of qualified, extended duty service outside of the United States between January 1, 2009 and April 30, 2010, and their spouses.

Eligible persons must be under contract for a new home on or before April 30, 2011, with the home’s closing occurring on or before June 30, 2011.

The federal home buyer tax credit is a true credit, too. Eligible buyers receive a dollar-for-dollar tax reduction equal to 10 percent of the subject home’s purchase price, not to exceed $8,000 for first-time home buyers, and not to exceed $6,500 for repeat home buyers.

Repeat buyers must have lived in their “main home” through 5 of the last 8 years in order to be eligibke.

Furthermore, both the buyer(s) and the subject property must meet certain minimum eligibility requirements:

  • The home may not be purchased from a parent, spouse, or child
  • The home may not be purchased from an entity in which the seller is a majority owner
  • The home may not be acquired by gift or inheritance
  • The home sale price may not exceed $800,000
  • Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers

The complete program description is published on the IRS website.

For additional information regarding your tax credit eligibility, you may want to speak with an accountant or other tax professional. It’s often worth the cost.

Federal Income Tax Deadline Extended To April 18, 2011

March 9, 2011
By

Taxes due April 18 2011

April 15 is the traditional due date for federal income taxes. It’s a deadline so ingrained in the American psyche that the April 15 calendar date is often called, simply, “Tax Day”.

In 2011, however, federal taxes aren’t due April 15. They’re due April 18. It’s because of a combination of holiday, calendars, and tax law.

The change centers on Emancipation Day.

Emancipation Day is a public celebration in the District of Columbia. Named a holiday in 2005, Emancipation Day honors President Abraham Lincoln’s April 16, 1862 signing of the Compensation Emancipation Act.  

Emancipation Day is a non-working day in the nation’s capitol but, this year, Emancipation Day falls on a Saturday. The municipality will observe the holiday Friday instead. This means that all of Washington, D.C. will be “closed” Friday, April 15 — the usual tax filing deadline date.

This includes the IRS.

Therefore, to accommodate Emancipation Day, the government is extending this year’s federal tax filing deadline to April 18, 2011. This year marks the second time Emancipation Day has forced the change of federal tax filing deadlines.

Also, as a non-related coincidence, tax filers in Washington State taking extensions to October 15 will also get a few extra days. October 15 is a Saturday so the extended tax deadline rolls over to the following Monday — October 17, 2011.

Military Personnel Can Still Claim The $8,000 Homebuyer Tax Credit

March 7, 2011
By

Tax credit extended for military householdsFor certain members of the military, and for certain federal employees, there’s just 2 months remaining to get use the federal home buyer tax credit.

Eligible persons include members of the uniformed services, members of the Foreign Service, and intelligence community employees who served at least 90 days of qualified, extended duty service outside of the United States between January 1, 2009 and April 30, 2010.

Spouses of persons meeting the above criteria are eligible as well.

The federal home buyer tax credit ranges up to $8,000 for first-time home buyers, and up to $6,500 for existing homeowners. Existing homeowners must have lived in their “main home” through 5 of the last 8 years to be eligible.

Claiming the federal tax credit is a two-step process. First, eligible persons must be under contract for a new home on or before April 30, 2011.  The home’s closing must then occur on or before June 30, 2011. 

The IRS does not make date exceptions.

Furthermore, both the buyer(s) and the subject property must meet certain minimum eligibility requirements:

  • The home may not be purchased from a parent, spouse, or child
  • The home may not be purchased from an entity in which the seller is a majority owner
  • The home may not be acquired by gift or inheritance
  • Each buyer must meet tax credit eligibility standards
  • The home sale price may not exceed $800,000
  • Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers

The complete program description is published on the IRS website.

Another important note is that the IRS is giving eligible buyers a tax credit as opposed to a deduction.  This means that a taxpayer qualifying for the full $8,000, and for whom the “normal” 2011 federal tax liability is $8,000, will have zero federal tax liability in 2011.

For additional information regarding your tax credit eligibility, call an accountant. Speaking with a tax professional is often worth the cost.

Boost Your 2010 Tax Deductions By Making Your January #Mortgage Payment A Little Bit Early

December 8, 2010
By

Tax deductions Looking for an extra 2010 tax deduction? Consider making your January mortgage payment a few days early.

It’s a simple strategy that works because of how mortgage interest works.

Unlike rent which is paid in advance at the start of a month, mortgage interest is only paid after it’s been borrowed. Your January mortgage payment, therefore, accounts for the interest that accrued in December.

And for a lot of Olympia homeowners, that mortgage interest is tax-deductible.

By making January’s mortgage payment in December, eligible homeowners can apply the interest paid to 2010′s tax returns instead of waiting to claim the same deduction against 2011. Don’t cut it close, though. It’s best to remit payment prior to the last week of the month, leaving your servicer ample time to receive and process your paperwork.

Most importantly, though, before prepaying on your mortgage, talk to your tax professional.

Not every homeowner is eligible for mortgage interest tax deductions, nor should every homeowner itemize their respective tax deductions. The “pay early” plan could be a wasted effort for you, ultimately, depending on your taxpayer profile.

If you don’t have an accountant that you trust, call your friends and ask who they use. Always seek the advice of a licensed professional.

Don’t Leave Tax Credits On The Table (And How To Get Them Back If You Already Filed)

April 7, 2010
By

Taxes are due April 15 and if you’re among the millions of Americans who wait until the last week to file, here’s a video interview that could help you reduce your federal tax liability. 

Originally broadcast by NBC’s The Today Show, the 4-minute piece reviews various tax credits and deductions, plus some recent tax law changes.  A few of the topics covered include:

  • Tax filers receiving larger “personal exemptions” in 2009 versus 2008
  • Unemployment income recipients being required pay taxes beyond the first $2,400 received
  • The “first time” home buyer credit being extended to non-first time home buyers for up to $6,500

The interview also talks about how taking a parent, child or other family member into your home may change your tax filing status and reduce your tax liability.

Even if you’ve filed your taxes already, watch the video above. You may find that you missed a potential deduction. If that’s the case, consider filing an amended return with the IRS to recapture the credits you left on the table.  Most times, the benefits of re-filing will outweigh the costs of doing it.

Be sure to talk with your tax professional for personal tax advice.

The Average Household Will Get $2,800 In Tax Refunds. Will You?

March 25, 2010
By

April 15 is Tax Day and the IRS estimates that the average U.S. household will receive a $2,800 tax refund this year.  If you’re among the Americans expecting a refund, this 4-minute piece from NBC’s The Today Show may be helpful. It’s a talk about how to receive a refund and what to do with it.

Some of the key points discussed include:

  1. Why state-issued tax refunds may be delayed this year
  2. How wage-earning people can claim their “Making Work Pay” tax credit of up to $800
  3. How to direct a tax refund to a 529 college savings plan for an even bigger tax refund

There’s also some sensible pointers on using tax refunds to pay down credit card debt, and to fund retirement plans, among other purposes.

If you haven’t started your tax planning yet, try to avoid leaving it for the last weekend.  Not only will your tax preparer have more time for you now, but you’ll leave yourself more time to track down important statements and receipts that can boost your federal and state tax deductions.

Taxes are due in 21 days.

7 Weeks Remain To Find A Home, Claim Up To $8,000 In Tax Credits

March 9, 2010
By

7 weeks remain for the Home Buyer Tax Credit ExpirationIn November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.

To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which the seller is a majority owner
  • You can’t acquire the home by gift or inheritance
  • Each buyer in the purchase must meet eligibility requirements

There’s other criteria, too.

For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.

And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction.  This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.

If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase.  You may find sellers more willing to negotiate today than several weeks from now.

Call CU Mortgage Division at (360) 539-4687 to obtain your FREE mortgage loan pre-approval or visit our website at www.cumortgagedivision.com .

There's 100 Days Left To Claim The Homebuyer Tax Credit

January 20, 2010
By

100 days remain for the Home Buyer Tax Credit ExpirationNovember 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program.  There’s 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers in Lacey to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, “move-up” buyers were also added to the program’s eligibility list meaning you don’t have to be a first-time home buyer to be eligible for the tax credit.  If you’ve lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

The tax credit’s basic eligibility requirements remain the same:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which they’re a majority owner
  • You can’t acquire the home by gift or inheritance
  • All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however. 

First, the subject property’s sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible.  And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

And lastly, don’t forget that the program is a true tax credit — not a deduction.  This means that a tax filer who’s eligible for the full $8,00 credit and whose “normal” tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

The complete list of qualifying criteria is posted on the IRS website.  Review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

There’s just 100 days to go. Call William Tuning at CU Mortgage Division at (360) 539-4687 to obtain your Mortgage Loan Pre-Approval and then your Realtor before you miss out on the Homebuyer’s Tax Credit.

How to claim your Home Buyer Tax Credit

January 19, 2010
By

IRS Video – On How to Claim Home Buyer Tax Credit

WASHINGTON — The Internal Revenue Service today released the new form that eligible homebuyers need to claim the first-time homebuyer credit this tax season and announced processing of those tax returns will begin in mid-February. The IRS also announced new documentation requirements to deter fraud related to the first-time homebuyer credit.

The new form and instructions follow major changes in November to the homebuyer credit by the Worker, Homeownership, and Business Assistance Act of 2009. The new law extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit.

With the release of Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and the related instructions, eligible homebuyers can now start to file their 2009 tax returns. Taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements.

The IRS expects to start processing 2009 tax returns claiming the homebuyer credit in mid-February after it completes the updating and testing of systems to meet the law’s new requirements. The updates allow the IRS to put in place critical systemic checks to deter fraud related to the homebuyer credit.

Some of these early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks.

In addition to filling out a Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:

  • A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
  • For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties’ names and signatures, property address, purchase price and date of purchase.
  • For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:

  • Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
  • Property tax records or
  • Homeowner’s insurance records.

The IRS also reminded homebuyers that the new documentation requirements mean that taxpayers claiming the credit cannot file electronically and must file paper returns. Taxpayers can still use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.

Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. For those homebuyers filing early, the IRS expects the first refunds based on the homebuyer credit will be issued toward the end of March.

The IRS encourages taxpayers to use direct deposit to speed their refund. In addition, taxpayers can use Where’s My Refund? on IRS.gov to track the status of their refund.

More details on claiming the credit can be found in the instructions to Form 5405, as well as on the First-Time Homebuyer Credit page on IRS.gov.