Nancy has created a nice explanation, this is an interesting article!
There are two seldom discussed points about the new $8,000 tax credit that present potential benefits to qualifying buyers.
1. The taxpayer can choose to take the tax credit on their 2008 or 2009 tax return, depending on which is more advantageous.
2. The taxpayer can amend or extend their 2008 tax return in order to receive the credit sooner!
Here are the details:
Question: If I'm qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
YES! The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.
Question: For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
YES! If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.
As always, the most important thing is to consult with your tax advisory before implementing any real estate or tax strategy.
Nancy Moeller, CPA, Real Estate Broker
Seven Gables Real Estate
Direct: 714 276-7006