Home Sweet Points Help At Tax Time
 For home buyers, deductible expenses include settlement charges for points. Deductible points are upfront charges for the use of money (not services). One point equals 1% of the loan amount. Points paid by either the buyer or seller are deductible by the buyer in the year of the purchase. Although some closing service fees are quoted as “points,” they are not deductible.
HINT: Consider having sellers pay for as many points as possible to increase your tax deduction.
How To Put Your Idle Equity To Work
 Unlike other types of loans, interest paid on home equity loans (including second mortgages, equity credit lines or some refinancings) is fully deductible up to $100,000 -- regardless of how you use the loan proceeds. If you use some or all of the proceeds for home improvements, that amount can be added to the $100,000 limit. (Be sure to document improvements to your home.) The above limits apply so long as all debt secured by the residence does not exceed the fair market value of the home.
HINT: Because interest paid on credit cards and other "consumer" loans, such as car loans, is not deductible, it makes tax sense for some homeowners to pay off this kind of debt using a home equity credit line or loan. Alternative Minimum Tax rules may apply, however. (Note: Some state laws restrict home equity loans. Consult your tax advisor to learn more.)
| FIRST-TIME BUYER TAX CREDIT |
New Extended And Expanded Rules
 Qualified first-time buyers can take a tax credit for a principal residence purchased from April 9, 2008 through April 30, 2010. First-time buyers are defined as those who have not owned a principal residence during the three years prior to the purchase closing/settlement date.One of two credits is available, with rules varying depending on purchase date:
- Homes purchased April 9, 2008 through December 31, 2008: Credit up to 10% of purchase price but no more than $7,500 (or $3,750 for each if married filing separately). Repayment required over 15 years in equal installments (or in full when the home is sold or ceases to be used as a principal residence and there is sufficient gain). First payment due two years after credit is claimed.
A full credit is available to qualified married-joint filers (or equivalent filing status) with Modified Adjusted Gross Income (MAGI) up to $150,000, and to single filers and married filing separately with MAGI up to $75,000. The credit is phased out and disappears completely for MAGIs more than $170,000 (joint filers and equivalent) or $95,000 (others).
- Homes purchased January 1, 2009 through April 30, 2010: Credit up to 10% of purchase price but no more than $8,000 (or $4,000 for each if married filing separately). No repayment required providing the home continues to be your principal residence for at least 36 months.
- Homes purchased after January 1, 2009 and closed/settled on or before November 6, 2009 are subject to the same income limits as in 1. above.
- Homes purchased after November 6, 2009 with a binding purchase contract no later than April 30, 2010 and closing/settlement by June 30, 2010 are subject to the following new rules:
- The purchase price of the home must not exceed $800,000.
- Income limitations are higher than for earlier credits: $225,000 MAGI for married-joint filers (or equivalent), phased out up to $245,000; $125,000 MAGI for single filers and married filing separately, phased out up to $145,000.
- Purchasers must attach documentation of their purchase to their tax return.
- Qualified members of the U.S. armed forces, military intelligence, or foreign service on overseas deployment for 90 days or more in 2008 or 2009 have until April 30, 2011 to purchase a principal residence and claim the tax credit.
HINT: Contact your tax professional to learn about the fine points of these short-term credits or go online to www.FederalHousingTaxCredit.com.
New Break For Move-Up Buyers
 On November 6, 2009, the first-time buyer tax credit was expanded to include move-up buyers. Now, longtime homeowners may qualify for up to a $6,500 tax credit (or $3,250 each for married filing separately) for buying a replacement principal residence after November 6, 2009 but with a binding purchase contract no later than April 30, 2010 and closing/settlement by June 30, 2010. The amount of the credit may not exceed 10% of the home’s purchase price. Qualified buyers must have lived in their home consecutively for any five-year period in the previous eight years. Rules under 2.b. for first-time buyer also apply.
HINT: Those who qualify can claim the credit on their federal income tax return for 2009 or 2010 using Form 5405.
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